Over the past few months, Fixed Income markets have remained in a state of flux as traders attempt to assess an ever-weakening economy, 20 year lows in equity prices, and massive supply from fiscal stimulus. The net effect of these forces have held 10 year treasury yields in a relatively tight range. The below table keys on closing 10 year yields and closing Fannie 30 yr April MBS prices.
| Comparison of Fannie 30 yr 4.5 April vs. 10 Year Yield | |||||||||
| 13-Jan | 15-Jan | 20-Jan | 23-Jan | 28-Jan | 2-Feb | 5-Feb | 10-Feb | ||
| 10 Year Yield: | 2.33 | 2.23 | 2.40 | 2.65 | 2.71 | 2.76 | 2.95 | 2.90 | |
| FNMA 4.5 April | 101.50 | 101.00 | 100.88 | 100.69 | 100.66 | 100.22 | 100.06 | 100.78 | |
| 13-Feb | 18-Feb | 23-Feb | 26-Feb | 3-Mar | 6-Mar | 9-Mar | Min | Max | |
| 10 Year Yield: | 2.89 | 2.74 | 2.78 | 2.98 | 2.93 | 2.83 | 2.89 | 2.23 | 2.95 |
| FNMA 4.5 April | 100.41 | 100.69 | 100.66 | 100.03 | 100.44 | 100.72 | 100.86 | 100.06 | 101.50 |
Over the past few weeks, MBS prices in relation to treasuries have been particularly well bid as Hedge Funds, Commercial Banks, and large servicing platforms have seen value in the sector and stepped in with full force. Mortgages trading tighter to treasuries in conjunction with our present price levels being in the upper quartile of our trading range have created an opportunity for borrower to exploit.
Over the past 3 weeks, the 10 yr has sold-off from 2.74% to close to 3.00%, yet mortgage prices have improved about .25 pt. Eventually, this trade will reverse and mortgages will under-perform in relation to treasuries. However, this recent trade creates great opportunity as current mortgage rates have trended down. Take advantage of this opportunity as it will be short-lived.
Loading ...
RSS feed for comments on this post. TrackBack URL
Leave a comment