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
    sentiment
 

 

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 1/27/23

Even with the most aggressive pace of rate hikes in over a generation during the past year, recent data suggests that there’s still a path to a “soft landing” for the Federal Reserve. The U.S. economy posted the kind of mild slowdown in the last quarter of 2022 that the Fed wants to see as it attempts to tame inflation without choking off growth. Gross domestic product beat expectations to rise at a 2.9% annualized pace, down from 3.2% in the third quarter and a long way from a recession.

MBS Weekly Market Commentary Week Ending 1/20/23

Have you heard? Inflation was so 2022. All jokes aside, after we learned last week that U.S. inflation cooled for the sixth consecutive month (the consumer price index dropped 0.1% in December compared to the month prior), expectations are now that the Federal Reserve is likely to downshift rate hikes to 25 BPS going forward, beginning at next month’s FOMC meeting.

MBS Weekly Market Commentary Week Ending 1/13/23

Pay attention to the bond market rather than the Fed. That’s what I’m hearing as we learned this week that inflation continued to ease in December, though much focus was also on Wells’ exit from the correspondent space and its ramifications. The headline CPI (-0.1% month-over-month, +6.5% year-over-year) posted the slowest inflation rate in more than a year and core inflation (+5.7% year-over-year), which excludes food and energy, also posted the smallest advance in a year.

MBS Weekly Market Commentary Week Ending 1/6/23

While it’s back to business as usual, it was a fairly quiet week as we settled into the new year. Fast inflation and high interest rates dominated the narrative and upended markets across the world last year. When the dust settled, 10-year Treasuries were 200+ BPS higher than the start of the year, the curve inverted in a bearish fashion faster and farther than ever, implied volume spiked, and mortgage spreads were pushed from stubbornly rich to suddenly cheap. The result was an entire trade-able universe moving out of the money, originations grinding to a halt, and duration becoming a function of illiquid trade flows.

MBS Weekly Market Commentary Week Ending 12/23/22

MCT would like to wish everyone a Merry Christmas and Happy Holidays. Talk to close the year has been dominated by the Federal Reserve’s most aggressive policy tightening in four decades and its impact on the economy, and for us the residential housing market.