Ginnie Mae TBAs Underperform Fannie Mae TBAs Again
The ten-year bond yield decreased 18 basis points, with yields decreasing from 1.11% to 1.93%. Ginnie Mae TBAs picked up 18 ticks.
Fannie Mae TBAs started the week at 104 5/32 and picked up about a 3/4 to close at 104 29/32. The ten-year yield decreased 18 basis points.
Mortgage rates fell along with bond yields after the FOMC statement. That said, we’ve seen tremendous volatility in the ten-year over the past month
Bonds reacted positively to the dovish FOMC statement. The forecast lowered to a range of 0.6% to 0.8%—well below the Fed’s target range of 2%.
Last week, the FOMC met and maintained the current level of the federal fund rate and continued its policy of re-investing maturing Treasury and MBS bonds.
For real estate investors, this week contains a few important economic releases. On Tuesday, we’ll get the FHFA Home Price Index.
In March 2013, the Fed was forecasting that 2015 inflation should be ~1.5–2%. Two years later, it’s forecasting 0.6–0.8%.
Since its March 2013 meeting, the Fed has been lowering its estimates for 2015 gross domestic product, or GDP, growth.
The problem for the Fed is that the unemployment rate has been falling for the wrong reasons and along with the labor force participation rate.
By removing the word “patient” from the FOMC statement, the Fed opened the door to a rate hike at the June meeting.
This is the third time Ginnie Mae TBAs have outperformed Fannie Mae TBAs since the FHFA decreased the monthly mortgage insurance premium for FHA borrowers.
Fannie Mae TBAs started the week at 103 30/32 and picked up about a quarter to close at 104 6/32. The ten-year yield decreased 13 basis points.
Last week, mortgage rates fell 8 basis points to 3.86% as the ten-year bond gave up 13 basis points in yield.
Last week, bonds digested the jobs report and also some of the other economic data, which was generally bond-bullish.
Wall Street will be interested to see if the Fed takes down its inflation forecast materially in its FOMC projection materials.
The FOMC meets this Tuesday and Wednesday, and the entire market is focusing on one word: “patient.”
There were 4.99 million job openings in January, up 28% year-over-year. Those job openings came in below the Wall Street estimate of 5.06 million.
If benefit costs are rising faster than wages and salaries, then employment costs are increasing. Yet you won’t see the same effect on consumer spending.
Average hourly earnings increased 0.1% month-over-month and 2.0% year-over-year to $24.78 an hour. Average weekly hours were flat at 34.6.
So why doesn’t the average citizen feel better about the economy? The reason is the labor force participation rate.
But if I knew how to manage my portfolio safer and smarter than most hedge fund managers, I could realistically grow my wealth.