MBS Weekly Market Commentary Week Ending 1/8/2021

Last week’s Treasury selloff marked the quickest reversal in government debt yields since the collapse in March. The prospect of a unified Democratic representation in Federal offices fueled stimulus bets and contributed to a further steepening yield curve (See 5-30 Year Spread). Long-term 30-year yields have risen to 1.875%. The 10-year is currently yielding to 1.117%. The Fannie Mae 30-year current-coupon spread to the 5/10-year blend tightened to +67, the lowest in 18 months.


*The MBS Market Commentary link will take you to MCT’s website.* Click to enlarge According to data published by Freddie Mac, U.S. 30-year home mortgage rates fell to 2.65% from 2.67%. The average 15-year rate fell to 2.16%, down from 2.17% a week earlier. Refinance applications increased 3.0% for the week ended Jan. 1, according to the Mortgage Bankers Association, following the previous week’s 8.8% drop. The purchase index decreased 1.6%. The conventional refinance sub-index increased 0.8% while the government sub-index was up 10%. VA refinancing applications increased 14.7% while FHA rose 2.3%. While the proportion of overall mortgage loans in forbearance for the week ended Dec. 27 remained steady at 5.53% from the week before, Ginnie Mae homeowners in forbearance rose to the highest in 8 weeks.

Cumulative 5-day performance of MBS coupons, relative to Treasuries, was mixed last week. Fannie 30-years underperformed by 2 ticks on lower coupons. Higher coupons outperformed their hedges by 2-3 ticks. Lower-coupon Ginnies lagged 3-5 ticks and higher coupons were mostly flat. Fannie 15-years were also relatively flat.

This week, Lael Brainard and Jerome Powel will deliver speeches on economic outlook. Conditions have changed since the Fed last met – more fiscal stimulus passed, and Democrats have split the Senate. The possibility of larger, more robust stimulus is on the table and that could cause the Fed to become more hawkish. However, if leaders of the Fed continue to display a comfortability with rising rates, we should expect rates to continue that way. Economic Calendar:

  • Tuesday: NFIB small business optimism; JOLTS job openings; Fed Governor Lael Brainard
  • Wednesday: MBA mortgage applications; CPI; monthly budget statement; Fed’s Beige Book
  • Thursday: Jobless claims; import/export prices; Bloomberg consumer comfort; revisions of
    Philadelphia Fed manufacturing survey; Fed Chairman Jerome Powell
  • Friday: Producer prices; Empire manufacturing; retail sales; Bloomberg January U.S.
    economic survey; industrial production; business inventories; University of Michigan


10-Year Treasury Yield Curve

Compare this chart with the mortgage rates chart to see how the 10-year treasury and mortgage rates are correlated. Read more below to learn how mortgage rates are tied to the 10 year treasury yield. View raw data on U.S. Department of the Treasury website.


Mortgage Rates Today

The current MBS daily rates are shown below in this chart for 5/1 Yr ARM, Jumbo 30 Yr, FHA 30 Yr, 15 Yr Fixed, 30 Yr Fixed. Sign up for our MBS Market Commentary to receive daily mortgage news in your inbox.

About the Author

Robbie Chrisman, Head of Content, MCT

Robbie started his mortgage industry career with internships during high school and college at Peoples National Bank in Colorado, and RPM & Bay Equity in the San Francisco Bay Area. After graduating from The University of Texas at Austin with a degree in Finance in 2014, he went to work at SoFi, where he rose to Director, Capital Markets assisting in the creation of SoFi’s residential mortgage division before leaving to work for TMS in Austin, Texas. From there, he went to work for FinTech startup Riivos in San Francisco and now is the Head of Content at Mortgage Capital Trading (MCT) in San Diego.

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Previous Weekly Market Reviews by Mortgage Capital Trading (MCT)

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MBS Weekly Market Commentary Week Ending 3/31/23

The market reaction went a little “too far, too fast” in regard to the Fed policy pivot. We witnessed the coupon stack (i.e., the price spread between TBA coupons) decompress in more than a trivial manner in a short period. However, the primary mortgage market has been largely reluctant to follow the Treasury rally, and mortgage rates have ultimately not dropped by the same amount as Treasury yields.

MBS Weekly Market Commentary Week Ending 3/24/23

The FOMC raised its benchmark rate by 25 basis points to a new range of 4.75%-5.00% on Wednesday, a middle ground policy move made in the hope of tampering inflation without further harming the banking system. The raise marks the 9th consecutive rate hike since the Fed began hiking in May of last year and brings the target fed funds rate range to the highest level since September 2007. While the central bank’s monetary policy has been aimed at correcting inflation, it has also revealed hidden weaknesses (e.g., entities whose balance sheets relied on low interest rates).

MBS Weekly Market Commentary Week Ending 3/17/23

Next week will reveal the Fed’s resolve on continuing to beat the drum on their aggressive inflation fight. The word until now has been that the central bank will keep hiking interest rates until inflation is under control.

MBS Weekly Market Commentary Week Ending 3/10/23

Events this week likely will lead to a higher peak interest rate than investors had been expecting just weeks ago. Central bankers appear worried about a cycle in which workers seek higher pay to offset inflation’s bite, and in turn trigger more price increases. In fact, inflation remains high because people have jobs and earn enough income to cover stubbornly expensive housing costs. Robust hiring is good for the economy and workers, but elevated pay growth puts added pressure on the Fed to bring down earnings. 

MBS Weekly Market Commentary Week Ending 2/10/23

The week after the jobs report is generally pretty data-light, and this week was no exception. With a dearth of data, market movement hinged on “Fed speak” and consumer sentiment. We saw some volatility return to bond markets as investors built in expectations for a more hawkish Fed. As a reminder, the Fed raised its benchmark rate last week to a range of 4.5% to 4.75%. Let’s run through what we’ve learned in the wake of that decision and a robust U.S. payrolls report that took some wind out of investors’ sails that had hopes for rate cuts by summer.

MBS Weekly Market Commentary Week Ending 2/3/23

As strong as economists may have thought the job market was, it’s even stronger. In addition to headline non-farm payrolls in January (517,000) beating estimates by around 300,000, employment numbers were revised higher for the past two months. Yes, a tight labor market is anathema to any sort of quick stop to the Federal Reserve’s rate hiking cycle, but the growth rate in average hourly earnings is declining, which will be welcome news to Fed Chair Powell and his colleagues. There exists a raging debate among economists over whether we’ll need a sharp rise in unemployment to keep inflation low.