Market Update, Wednesday, April 22, 2020
Mortgage applications decreased 0.3% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 17, 2020. The Refinance Index decreased 1% from the previous week and was 225% higher than the same week one year ago. The Purchase Index increased 2% from one week earlier. The FHA share of total applications increased to 10.3% from 9.5% the week prior. The VA share of total applications decreased to 13.8% from 14.3% the week prior. The USDA share of total applications remained unchanged from 0.4% the week prior.
Market Update, Tuesday, April 21, 2020
MBS has been sliding since prices peaked on April 9th. Since then, daily fixed rate origination has continued to flood the market (biggest driver of performance), as the Fed pulled back its MBS purchase operations, and economic uncertainty weighing down on demand. These factors combine to apply downward pressure on mortgage prices, which we saw yesterday. For perspective, the UMBS 30yr 2.5 for May settle closed at 104-14 on April 9th vs yesterday’s close of 103-16+, almost a full point lower. On the supply front, fixed rate originations have been averaging $7.4B a day over the past 5 days, surpassing $8B yesterday. Over the last week, originations have been consistently in a $5-8B range.
Market Update, Monday, April 20, 2020
The Fed purchased $14.5B of MBS on Friday: $3B of FN 15yr (2.5s/3s), $7.5B of FN 30yr (2.5s/3.5s), and $4B of GN2 30yr (2.5s, 3.5s, 4.5s). This wraps up another week of the Fed’s agency MBS purchase operations, totaling $68B. The Fed’s mortgage purchases fell to $15B/day last week from $30B/day the week prior. This week, as announced Friday afternoon, the Fed will be updating its bond buying schedule again by reducing mortgage purchases to $10B/day. Treasury purchases will also be modified to $15B/day from $30B/day last week.
Market Update, Friday, April 17, 2020
New origination flows remain very much on the heavier side yesterday and totaled near $8B for the third time this week. The 5-day average is now $7.1B per day up from the $4.1B per day average seen just last week. For the day the Fed purchased $13.6B of MBS ($10.6B FN / $3.0B GN). The Fed still has in place a maximum daily target of $15B in MBS purchases. Yesterday’s transactions brought the Fed’s total purchases to $500B since the start of this round of quantitative easing.
Market Update, Thursday, April 16, 2020
Yesterday’s total origination flows were about $6.7B which is right on top of 5-day moving average. For the day the Fed purchased $13.0B of MBS ($9.6B FN / $3.4B GN). This morning, treasuries are trading mixed ahead of the day’s activity. Currently, the 2yr is -0.5/32 (0.209) and the 10yr is +6.5/32 (0.614).
Market Update, Wednesday, April 15, 2020
Yesterday’s new origination flows totaled just over $7.5B for the session bringing the 5-day average to $5.6B. The Fed continued to support liquidity and supplemented the demand side of the equation. For the day the Fed purchased $15.2B of MBS ($11.3B FN / $3.9B GN).
Market Update, Tuesday, April 14, 2020
Yesterday, origination flows were very much on the heavier side due to an overhang of supply coming out of the holiday weekend and as the sell-off in dollar prices compelled hedgers to add coverage. Total new hedges for the day totaled about $7.7B, which is $3B higher than the recent 5-day average. As far as Fed support, on Friday they announced that the max size of their daily agency MBS auctions would be reduced to $15B. Yesterday, the Fed purchased $12B of MBS ($9.5B FN / $2.5B GN), which was down from the $18.1B of agency MBS demand they added to the market on Thursday. Since this round of QE’s inception in mid-March the Fed has purchased $458B.
Market Update, Monday, April 13, 2020
During last Thursday’s abbreviated trading session ahead of the holiday weekend, current coupon mortgages outperformed while higher coupons lagged as Fed operations focused in 2.5s and 3.0s continue to outstrip supply. Originators were busy on Thursday covering positions and perhaps adding coverage ahead of the weekend. Total origination flows were about $6.1B on the day which was far more robust than the $4.1B per day average seen over the past week. On Thursday, there were a total of 4 different Agency MBS purchase operations conducted by the Fed. They purchased a total of $18.1B in securities (10.2B FN / 7.9B GN) for April settlement. At the 2pm early close, 30yr UMBS 2.5s in April were +7/32 (104-15) and 15yr UMBS 2.0s were +4/32 (103-10).
Market Update, Thursday, April 9, 2020
Yesterday, benchmark 10-year notes were down 12/32 pushing yields up to .77%, while 30-year bonds fell 1-10/32 with yields at 1.38%.
In Wednesday’s economic news, the Trump administration asked Congress for an additional $250B in emergency economic aid for small U.S. businesses impacted by the coronavirus pandemic. In addition, the government’s $350B program to aid struggling businesses received some forward movement on Wednesday, with the launch of a new system that will allow hundreds of new lenders to participate. In other news, consumer confidence in the U.S. witnessed its biggest weekly decline on record as the coronavirus caused massive deteriorations in the views Americans have on the state of the economy. The Bloomberg Consumer Comfort Index plummeted 6.4 points to 49.9, hitting the lowest since October 2017. In the past three weeks, the measure has plummeted more than 13 points, also the steepest decline in records back to 1985.
Market Update, Wednesday, April 8, 2020
The Mortgage Bankers Association application stats were released this morning and showed that applications in the U.S dropped to the lowest level since 2015. The index was down 17.9% with refinances dropping 19.4% and purchases falling 12.2%. The average 30 year fixed rate fell to 3.49% from last week’s report of 3.82%. The share of applications seeking to refinance was relatively flat from last week at 74%.