Friday, October 25, 2019 |
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| MANAGING DIRECTOR: Scott Carrithers PORTFOLIO SALES AND SERVICE: Steve Panknin • George Morris • Jeff Goble • Chris Thompson • Sean Doherty Kevin Doyle • Lonnie Harris • Mark Tranckino • Robert Schuyler • Tom Toburen • Josh Kiefer Nicole Burczyk • Kelley Frye • Natalie Regan • Aaron Stoffer • Chuck Honeywell |
| US Treasury Market | |||||||||||
| Date | 1 mo | 3 mo | 6 mo | 1 yr | 2 yr | 3 yr | 5 yr | 7 yr | 10 yr | 20 yr | 30 yr |
| 10/18/19 | 1.75 | 1.66 | 1.63 | 1.58 | 1.58 | 1.56 | 1.56 | 1.66 | 1.76 | 2.06 | 2.25 |
| 10/21/19 | 1.76 | 1.67 | 1.65 | 1.59 | 1.62 | 1.59 | 1.61 | 1.70 | 1.80 | 2.10 | 2.28 |
| 10/22/19 | 1.75 | 1.65 | 1.64 | 1.59 | 1.60 | 1.59 | 1.60 | 1.68 | 1.78 | 2.07 | 2.26 |
| 10/23/19 | 1.74 | 1.65 | 1.64 | 1.58 | 1.58 | 1.58 | 1.58 | 1.67 | 1.77 | 2.06 | 2.25 |
| 10/24/19 | 1.75 | 1.67 | 1.65 | 1.59 | 1.58 | 1.58 | 1.58 | 1.67 | 1.77 | 2.08 | 2.26 |
The Importance of Composition
The current combination of the lowest rates since the summer of 2016 and an all-time high in home prices present mortgage backed security buyers with more things to consider before buying MBS securities. When homeowners are lining up to refinance existing mortgages, MBS investors need to pay closer attention to the composition of the mortgaged backed securities being considered. Most of these components are rather obvious. Premium risk on securities with higher in the money mortgage rates (weighted average coupons) are probably most at risk. Other aspects of pools to consider are average loan sizes, geographics, third party origination percentage (TPO), loan originators and servicers of the loans. Loan amortization type will also affect prepayment response to low interest rates. The shorter the amortization (10yr vs 30yr), the less total interest being paid by the homeowner over the life of the loan. As a result, the incentive to refinance should be reduced.
Source: Bloomberg, LLC
Source: Bloomberg, LLC
This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.
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