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.
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.
The ten-year bond yield increased 25 basis points, with yields decreasing from 1.99% to 2.24%. Ginnie Mae TBAs gave up 25 ticks.
When homeowners prepay, investors lose a high-yielding asset and reinvest the proceeds in a lower-rate investment. This means lower returns going forward.
Investors are switching out of Ginnie Mae TBAs and into Fannie Mae TBAs. Mortgage REITs are big users of TBAs, quickly increasing or decreasing exposure.
While most indices showed the housing market bottoming out around February 2012, the FHFA House Price Index showed it bottoming out around May 2011.
Ginnie Mae TBAs lost 11 ticks, while Fannie Mae TBAs lost only 9 ticks. This is a function of continued low rates and also changes out of the FHFA.
The ten-year bond sold off by 10 basis points, with yields increasing from 1.95% to 2.05%. Ginnie Mae TBAs lost 7 ticks, while Fannie Mae TBAs lost 3 ticks.
The ten-year bond sold off by 32 basis points, with yields increasing from 1.64% to 1.96%. Ginnie Mae TBAs lost almost a point.
The ten-year bond rallied 16 basis points, with yields decreasing from 1.80% to 1.64%. Ginnie Mae TBAs picked up 16 ticks.
The ten-year bond rallied 4 basis points, with yields decreasing from 1.84% to 1.80%. Ginnie Mae TBAs picked up 9 ticks.
The ten-year bond rallied 10 basis points, with yields decreasing from 1.94% to 1.84%. Ginnie Mae TBAs were more or less unchanged.
The Mortgage Bankers Association (or MBA) Refinance Index rose 66% from 1,349 to 2,245 as rates finally fell enough to allow refinances.
Ginnie Mae TBAs rallied 9 ticks to close at 105 20/32. However, they underperformed Fannie Mae TBAs, which rallied 17 ticks.
After Obama announced the new insurance guidelines, the mortgage-backed securities market, especially the TBA market, reacted violently.
It looks like the MBA refinance index is still flat on its back. So while we could see a pickup in refis, so far it hasn’t materialized.
Increases in prepayment speeds are a negative for mortgage REITs, however, that risk can be mitigated by switching into REITs focusing on adjustable rate mortgages.
The ten-year bond sold off, with yields increasing from 2.16% to 2.25%. Ginnie Mae TBAs rallied to close at 104-19.
Ginnie Mae TBAs are where government loans go, such as the federal housing administration and veterans affairs loans.
The MBA reported that the share of refinance applications increased to 66.4%. This caught many by surprise, but it could be a pleasant surprise for the originators.
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