| Wednesday, February 26, 2020 |
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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 |
| 02/19/20 | 1.61 | 1.58 | 1.56 | 1.47 | 1.42 | 1.39 | 1.41 | 1.50 | 1.56 | 1.86 | 2.01 |
| 02/20/20 | 1.61 | 1.58 | 1.55 | 1.46 | 1.39 | 1.35 | 1.37 | 1.45 | 1.52 | 1.81 | 1.97 |
| 02/21/20 | 1.60 | 1.56 | 1.53 | 1.43 | 1.34 | 1.30 | 1.30 | 1.39 | 1.46 | 1.75 | 1.90 |
| 02/24/20 | 1.60 | 1.53 | 1.49 | 1.35 | 1.26 | 1.21 | 1.21 | 1.30 | 1.38 | 1.68 | 1.84 |
| 02/25/20 | 1.59 | 1.53 | 1.47 | 1.30 | 1.20 | 1.16 | 1.16 | 1.25 | 1.33 | 1.63 | 1.80 |
30 Year Low Coupon Mortgage Pools
30 year low coupon mortgage pools can offer investors attractive yields if the right pools are sourced. With refi rates at 3.65%, borrowers have limited savings to refinance 2.5% and 3% coupon loans. If rates remain range bound around current levels, they could be a great option for those looking for yield. Only downside is extension risk in event rates head higher. With refi costs averaging around $1500-$2000, as a general rule of thumb, you need approximately 3/4 of a point in interest rate savings on an average sized mortgage loan. Since loan sizes vary, we like to look at the average payback period of 12 to 18 months for most borrowers before they should consider refinancing.
Source: Bloomberg LP
Selecting pools with low to no refi incentive can offer investors a little extra peace of mind when it comes to paying a premium on long maturity mortgage securities. This chart reflects the risk associated with coupons from 2.50% to 4%.
30yr Refinance Incentive
Selecting pools with low to no refi incentive can offer investors a little extra peace of mind when it comes to paying a premium on long maturity mortgage securities. This chart reflects the risk associated with coupons from 2.50% to 4%.
30yr Refinance Incentive
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.
•Not FDIC Insured •No Bank Guarantee •May Lose Value