MBS Weekly Market Commentary Week Ending 2/19/2021

Long-term 30-year yields have risen to 2.169%, the 10-year is currently yielding 1.375%, and the Fannie Mae 30-year current-coupon spread to the 5/10-year blend widened to +77. Yields on Treasuries closed at their highest in almost a year.

According to data published by Freddie Mac, U.S. 30-year home mortgage rates fell to 2.81% from 2.73%. The average 15-year rate fell to 2.21%, up from 2.19% a week earlier. Refinance applications decreased 4.7% for the week, according to the Mortgage Bankers Association, following the previous week’s 4.2% drop. The purchase index decreased 6.1%. VA refinancing applications fell 4.1% after rising 8.7%.

The U.S. Treasury will auction $209 billion more of debt this week, adding to the upward pressure on Treasury yields. Federal Reserve support for mortgages will be on the heavier side this week, with about $6.9 billion targeted per day. This outweighs the 30-day average for the Fed’s MBS buying at $6.3 billion per day.

Higher-coupon UMBS 30-year MBS were best performers on Friday, with the 4% best in show at +2.75 ticks versus its Treasury hedges. The 1.5% through 2.5% coupons – the coupons with the highest durations and therefore most vulnerable in a rate sell-off, lagged.

Economic Calendar:

  • Tuesday: CoreLogic Home Price Index
  • Wednesday: New Home Sales, MBA Refi Applications Index