MBS Weekly Market Commentary Week Ending 3/8/19

Treasury yields dropped on the week, reflecting signs of economic weakness on the horizon and a weak February employment report.

*The MBS Weekly Market Profile Report corresponds to the commentary below.*

Treasury yields dropped on the week, reflecting signs of economic weakness on the horizon and a weak February employment report. The yield on the 10-year note declined by over 12 basis points on the week to close at 2.63%, leaving the yield curve (2-10s) 3 basis points flatter. The 2-5 year yield curve spread continued to invert to -3.3 basis points, while the 2-5-10 butterfly also moved to its lowest level since late 2013, ending the week at -23.

30-year MBS spreads continued to narrow relative to interpolated 5-10 year Treasury yields, with the 30-year current coupon spread tightening by 2 bps to +85. The most notable aspect of last week’s MBS market was the weakness in coupon swaps; both the 30-year Fannie and Ginnie II coupons stacks compressed last week. The Fannie 4/3.5 and 4.5/4 swaps narrowed by 7/32s and 5/32s last week, respectively, while the GNII 4/3.5 swap contracted by a whopping 10/32s, a large move even in the context of the rally in Treasuries. Ginnie II/Fannie swaps also were under pressure, leaving the GNII/FN 4 swap 5 ticks weaker at +18/32s.

This week’s commentary will be superseded by a separate report on last week’s Single Security Initiative Countdown Conference in New York. Please look for a separate email outlining the most recent developments or view the full SSI recap post for more details about the whitepaper and upcoming webinar.

About the Author: Bill Berliner

As Director of Analytics, Bill Berliner is tasked with developing new products and services, enhancing existing solutions, and helping to expand MCT’s footprint as the preeminent industry-leader in secondary marketing capabilities for lenders.

Mr. Berliner boasts more than 30 years of experience in a variety of areas within secondary marketing. He is a seasoned financial professional with extensive knowledge working with fixed income trading and structuring, research and analysis, risk management, and esoteric asset valuation.

Mr. Berliner has also written extensively on mortgages, MBS, and the capital markets. He is the co-author, with Frank Fabozzi and Anand Bhattacharya, of Mortgage-Backed Securities: Products, Structuring, and Analytical Techniques, which was named one of the top ten finance texts in 2007 by RiskBooks. He wrote and edited chapters for The Handbook of Mortgage-Backed Securities, The Handbook of Fixed-Income Securities, Securities Finance, and The Encyclopedia of Financial Models. In addition, Mr. Berliner co-authored papers published in The Journal of Structured Finance and American Securitization. He also wrote the monthly “In My View” column for Asset Securitization Report from 2008-2012.