| Wednesday, November 29, 2023 |
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MANAGING DIRECTOR: |
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US Treasury Market |
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| Date | 1 mo | 3 mo | 6 mo | 1 yr | 2 yr | 3 yr | 5 yr | 7 yr | 10 yr | 20 yr | 30 yr |
| 11/21/23 | 5.39 | 5.39 | 5.44 | 5.25 | 4.87 | 4.59 | 4.40 | 4.43 | 4.39 | 4.73 | 4.55 |
| 11/22/23 | 5.39 | 5.42 | 5.46 | 5.26 | 4.90 | 4.62 | 4.43 | 4.45 | 4.41 | 4.74 | 4.54 |
| 11/24/23 | 5.39 | 5.41 | 5.47 | 5.27 | 4.95 | 4.67 | 4.49 | 4.51 | 4.47 | 4.80 | 4.60 |
| 11/27/23 | 5.41 | 5.40 | 5.46 | 5.25 | 4.89 | 4.60 | 4.41 | 4.43 | 4.39 | 4.73 | 4.54 |
| 11/28/23 | 5.39 | 5.41 | 5.44 | 5.19 | 4.74 | 4.48 | 4.28 | 4.34 | 4.32 | 4.68 | 4.51 |
The data in the table above is static as of the time it was pulled, so rates may have changed. Treat all data in this table and PMR as indications only and availability is always subject to change. This information was pulled manually from sources we believe to be reliable. New source, as of 12/12/2022, Bloomberg, L.L.P. As of: close of business 11/27/2023.
Positive Outlook for MBS in 2024
As we come to a close in 2023, it was a tough year for Agency MBS. Lower price action due to diminished demand from former buyers now hoarding cash was partially offset by thin supply and renewed affection from money managers who spied and oversold market (with the Federal Reserve being the largest seller). These opposing forces produced tremendous price/yield volatility. Ultimately, mortgage spreads have held in surprisingly well at roughly 150-200bps vs. Treasury curve. Looking ahead, Agency MBS are poised to do well in 2024. Even though the economy has shown tepid signs of growth, selected labor and inflation data has recently weakened. There’s still much improvement needed to reach the Fed’s 2% inflation target. But current trends suggest we are near the end of this historic tightening cycle and that will alleviate some uncertainty (volatility) of future rates which translates into a technical positive for MBS pricing. Even as mortgage rates are at nearly a two-decade high, the housing market remains strong due to lack of inventory/supply. This negative net supply of new mortgage should continue to support strong demand and tighter MBS spreads. If these forces fall back into a normal balance, Home Price Appreciation is likely to decline in coming years, leaving homeowners “locked-in” with limited opportunities to refi as their current mortgage is still “out of the money” or their home value has dropped sufficiently. This combination will mitigate prepayment risk associated with mortgage securities. Additionally, if we see a reduction in rates, banks should experience an inflow of deposits and that could boost demand for reinvestment back into MBS. Furthermore, any normalization of the yield curve (with Fed easing), should force spreads to tighten against the curve.
Currently, we sit at nearly decade wide spreads in 30yr MBS pools. Fannie Mae 7%, are offering nearly 200bps in spread, versus the interpolated US Treasury curve. The landscape appears positive for Agency MBS. We believe now is an excellent opportunity to improve book yields without credit risk and accepting very little duration shift risk.
Please reach out to your Country Club Bank Capital Markets representative for any questions or live offerings. Mortgage Matrix provided below (subject to price/availability).
Currently, we sit at nearly decade wide spreads in 30yr MBS pools. Fannie Mae 7%, are offering nearly 200bps in spread, versus the interpolated US Treasury curve. The landscape appears positive for Agency MBS. We believe now is an excellent opportunity to improve book yields without credit risk and accepting very little duration shift risk.
Please reach out to your Country Club Bank Capital Markets representative for any questions or live offerings. Mortgage Matrix provided below (subject to price/availability).
Source: Bloomberg / Indications only, subject to change and availability without notice
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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