Market Updates provided by Pheim Penman

Fixed rate markets were mostly flat in listless trading, with Treasuries trading marginally higher in price Friday, up 2/32nds, while current coupon mortgages closed tighter on lighter than average origination supply of around $2.1B. Month-to-date originations totaled $45.205B.

In an informal survey of lenders, lock volumes were relatively unchanged week-over-week, with mortgages and rates trading in a relatively tight range. Primary zero point, 30-year rates were in the 3.75-4.25% range; most lenders were flat to .125% lower last week. Using 4.00% as the prevailing rate, the primary/secondary spread was 110 bps, up from 105 bps the prior week. Currently, gross note rates of 3.00 to 3.625% are slotting into the 3.0% coupon, 3.75 to 4.125% into the 3.50%, and 4.25 to 4.875% into the 4.0%. All note rates from 3.50 to 4.625% are a buydown. The 3.75% and 4.25% coupons are cuspy and vary based on changing market conditions.

There is a scheduled Fed purchase operation today of 30-year bonds totaling $1.35B in FN/FG 3.5 and 4.0% coupons.

Quiet finish to last week, as the biggest news on the first summer Friday of the year was the release from the Alternative Reference Rates Committee (ARRC), announcing that the U.S. Treasuries-backed repurchase agreement market (repo) voted to replace the use of Libor as the interest rate benchmark, as expected. The process to convert from Libor will not start until the final proposal later this year and will take several years to implement, so the current impact of the announcement will be minimal.

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