Treasuries finished down for the day, sending the yield on the ten-year to upper part of the 2.5% - 3% range it has been in since mid January. Treasuries rallied off their lows from the early afternoon as stocks dipped into negative territory in the last 30 minutes of trading. The two-year finished down 3/64, and the ten-year was lower by 11/32. The benchmark curve was 1.5 basis points steeper on the day, and currently sits at +197.5 basis points. A basis point represents .01%.
Today was without a Fed purchase or a Treasury auction. Tomorrow the Treasury will auction $8 billion in five-year Inflation protected Securities.
Mortgage Rates
Rates on 30-year fixed rate mortgages rose last week to 4.73% from their all time low of 4.7% reported the week before. Loans originated for purchases were down 4.2% week over week (-29.1% from a year ago) but refinances were strong (up 7.7% for the week – up 186.1% for the year) and continue to dominate loan origination with 80.2% of the total dollar amount of loans originated last week.
The story with mortgages has changed very little in the past month. Rates may have a little farther to drop, but mortgage originators are still struggling to meet demand. Fed purchases continue to artificially prop up the market for MBS but risk premiums in the securitized market remain higher than usual due to the big question of prepays. We can look back to other prepay booms, (2003 for example) and begin to get an idea of how things may really start to heat up as the summer moving season begins. However, LTV problems for some homeowners may or may not stand in the way of a 2003 type prepay environment. For those of you who don’t remember see this previous post on the President’s “Making Home Affordable” plan.
I say “may or may not” because the plan has been a complete flop so far. The plan aimed at helping 400,000 homeowners has seen 312 applications since October, due largely to the complete lack of incentives for lenders to participate in the program. Secretary of Housing and Urban Development Steve Preston, who heads the operation that is partnering with Fannie and Freddie, blames congress for “Dotting the I’s and crossing the T’s for us, [making] this program tough to use.” Pretty much in line with any other case of government involvement in activities that should undoubtedly be left to private enterprise.
Have a great evening.
Cliff J. Reynolds Jr., Junior Analyst
Today was without a Fed purchase or a Treasury auction. Tomorrow the Treasury will auction $8 billion in five-year Inflation protected Securities.
Mortgage Rates
Rates on 30-year fixed rate mortgages rose last week to 4.73% from their all time low of 4.7% reported the week before. Loans originated for purchases were down 4.2% week over week (-29.1% from a year ago) but refinances were strong (up 7.7% for the week – up 186.1% for the year) and continue to dominate loan origination with 80.2% of the total dollar amount of loans originated last week.
The story with mortgages has changed very little in the past month. Rates may have a little farther to drop, but mortgage originators are still struggling to meet demand. Fed purchases continue to artificially prop up the market for MBS but risk premiums in the securitized market remain higher than usual due to the big question of prepays. We can look back to other prepay booms, (2003 for example) and begin to get an idea of how things may really start to heat up as the summer moving season begins. However, LTV problems for some homeowners may or may not stand in the way of a 2003 type prepay environment. For those of you who don’t remember see this previous post on the President’s “Making Home Affordable” plan.
I say “may or may not” because the plan has been a complete flop so far. The plan aimed at helping 400,000 homeowners has seen 312 applications since October, due largely to the complete lack of incentives for lenders to participate in the program. Secretary of Housing and Urban Development Steve Preston, who heads the operation that is partnering with Fannie and Freddie, blames congress for “Dotting the I’s and crossing the T’s for us, [making] this program tough to use.” Pretty much in line with any other case of government involvement in activities that should undoubtedly be left to private enterprise.
Have a great evening.
Cliff J. Reynolds Jr., Junior Analyst
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