Ginnie Mae TBAs Catch a Bid as the Bond Market Rallies
Investors have been switching out of Ginnie Mae TBAs and into Fannie Mae TBAs. Mortgage REITs are big users of TBAs and can quickly increase or decrease exposure.
When TBAs rally, it means capital gains for mortgage REITs. These gains increase TBAs’ returns, especially when added to their interest income.
With a focus to draw first-time homebuyers into the market, the government has announced measures to increase credit availability for new homebuyers.
Last week was a milestone in the European bond market, where the German Bund yield went below 10 basis points in yield.
There are basically two types of state foreclosure laws: judicial and non-judicial.
Refinancing activity affects prepayment speeds—a critical driver of mortgage REIT returns. When interest rates fall, those who can refinance at a lower rate do.
A drop in rates should spur more activity and make housing more affordable, even without home prices falling.
The refi boom dried up in late 2013, credit has been tight, and first-time homebuyers have been on the sidelines. If low rates are here to stay, 2015 could be a good year for origination.
Refinances have continued, driven mainly by home price appreciation and not interest rates. With interest rates falling, should REITs fear another refi wave?
QE has increased the size of the Fed’s balance sheet almost eightfold since the turn of the century, from just more than $500 billion in 2000 to $4.5 trillion currently.
Credit conditions are generally strong elsewhere, so there has to be something going on in the mortgage credit market. Regulatory conditions are making banks reluctant to lend.
After the March FOMC meeting, the Fed forecast that 2015 unemployment would come in at 5.2% to 5.3%, a drop of 5.2% to 5.3% from its forecast in December.
The day the Fed released the FOMC meeting minutes began with the ten-year bond yielding 1.90%. Bonds didn’t react much to the minutes and finished the day about where they began.
Investors have been switching out of Ginnie Mae TBAs and into Fannie Mae TBAs.
Fannie Mae TBAs started the week at 105 and gave up two ticks to close at 104 30/32. The ten-year yield increased 11 basis points.
Mortgage rates are the lifeblood of the housing market, and the Fed’s plan to help housing began with pushing rates lower in order to allow people to refinance.
When investors want to know what’s going on in the bond market, they in essence want to know where the ten-year bond is trading.
Last week was relatively data-light with really only the FOMC minutes of interest to real estate investors.
There were 5.13 million job openings in February 2015, up 23% year-over-year. Those job openings came in below the Wall Street estimate of 5.01 million.
If benefit costs rise faster than wages and salaries, then workers become more expensive, yet they are not receiving the full benefit of that increase.
But if I knew how to manage my portfolio safer and smarter than most hedge fund managers, I could realistically grow my wealth.