Market Update provided by Rheim Penman

 

On Friday, mortgages outperformed as lighter supply from the origination community was met by better demand from real money accounts.  Current coupon mortgages finished the day about 3/32nds tighter (outperform) to treasuries as the day’s origination flow totaled about $1.8B.  The Fed’s reinvestment operation on Friday was focused on 30yr Fannie & Gold securities.  Today’s flows will be focused in 15yr conventional agency paper.  Last week, lenders reported that 30yr rates were posted at the lower end of the recent range with the move in the market. For the most part, 30yr primary rates seem to be posted in the 4.125-4.25% range.  Using 4.125% as the prevailing primary rate, the primary/secondary spread is 108bps which is down from 115bps the previous week.  With the move rates, lenders reported, on average, that locks were up 5-10% last week.

For the most part, 30yr primary rates seem to be posted in the 4.125-4.25% range.  Using 4.125% as the prevailing primary rate, the primary/secondary spread is 108bps which is down from 115bps the previous week.  With the move rates, lenders reported, on average, that locks were up 5-10% last week.

In agency swaps, current coupon Gold/Fannie swaps were little changed on the day while Ginnie2/Fannie swaps continued on their recent move lower.  The Gold/Fannie and Ginnie2/Fannie 4.0% swaps are currently trading -1/32 and +16.5/32, respectively.  At 5:00pm, FNCL (30yr) 4.0s in June were +11/32 (105-04) and FNCI 3.0s in June were +5.5/32 (102-21+).

This morning, treasuries are trading a bit lower across the curve following Friday’s rally.  The 2yr is -0.5/32 (1.299) and the 10yr is -3/32 (2.336).

 

The rally in the market on Friday was largely data driven.  A weaker than expected reading on the April CPI struck a bit more of a dovish tone and fed the rally as inflation remains below the Fed’s stated target.