Compass News and 6 free sample viagra Events
Happy new year! As we look ahead to 2019, we are already seeing conference season pick up in full swing. We will be at the following industry events and look forward to meeting you there if you are also attending. If you would like to set up a meeting to discuss Compass Analytics’ suite of tools or more information about partnering with us, please email Phalla Sok at email@example.com.
January 28 – Independent Mortgage Bankers Conference (San Francisco, CA)
February 5 – Texas MBA Southern Secondary Conference (Houston, TX)
February 12 – CMLA Rocky Mountain Mortgage Lender’s Expo (Denver, CO)
February 17 – The Mortgage Collaborative Winter Lender Member Conference (Austin, TX)
February 25 – National Mortgage Servicing Conference and Expo (Orlando, FL)
March 10 – Ellie Mae Experience 2019 (San Francisco, CA)
The treasury yield curve remains flat / inverted with the 2-10 year spread currently at 17bps, 2 basis points wider than one month ago. With the 2-5 year spread slightly inverted at 2bps, it appears inevitable that we will see a 2-10 year inversion in 2019. Predictably, many external factors are effecting the Treasury market, including the Federal government shutdown, Brexit news coming out of the UK and the US-China trade war truce.
The December jobs report showed that the labor market remains in solid shape. Nonfarm payrolls came in significantly better than expected at 320k vs 178k expected and the unemployment rate ticked up to 3.9%, from 3.7%. The report is mostly good news for workers as a low employment rate indicated most Americans who want to work are able to. Wage growth remains the lingering problem as US workers haven’t seen their paychecks increase, which may be a lingering effect to the current government shutdown. On the JPM earnings call, Jamie Dimon suggested that Q1 2019 GDP could be close to zero if the shutdown lingers much longer.
The market is pricing in a 0% chance that Fed raises rates in March 2018. Given recent market activity and dovish comments from Fed Chair Powell, the general consensus has shifted from 3 or 4 Fed rate hikes in 2019 to the possibility 1-2 hikes in 2019, with a pause until later in the year. Starting in 2019, press conferences will follow all FOMC meetings – in the past, the press conferences have been 4x a year and the FOMC typically makes adjustments to rates during meetings that are followed by press conferences.
The markets are likely happy to say goodbye to 2018, although the year did not end quietly. Treasury repo rates surged to over 5% on 12/31/18, when the effective fed funds rate held steady at 2.40%. The heaviness in the financing market lingered into the first week of January, which will likely hit the Fed’s radar. While pressure in repo financing rates indicate year-end window dressing, this time there are some differences – the scale was substantially larger than anything seen in recent years; overnight rates typically increase by 8-10bp at the end of quarter, not 50+bp. Because the increase in volume was done via the FICC, it appears that the market was attempting to preserve balance sheet. According to market research, this is the first significant year-end issue in a long time. It will be interesting to understand the reason for the increased demand as market color indicates that there were some investors who took delivery on TBA product, when they typically roll the trade forward to the next month.
– Jason Freydberg
The rally in rates continued through December into the new year as FNCL shed another 21 bps, finishing the month ending with January class A notification at 3.56%. Our Conventional 30Yr note rate came in about 13 bps lower, finishing the period at 4.99%. Trust IOs had another rough month, off about 1.25 point on average with multiples shedding about 28 bps. In TBAs we had compression across the stack, with the 4.0/4.5 swap 10 ticks tighter and 4.5/5.0 swap just 3 ticks tighter. As we have seen in the past with this type of compression, we expect the Agencies to diverge from Trust IO ratios, especially in those rates affected by the 4.0/4.5 swap tightening.
– Virgil Caselli
Excess Primary-Secondary Spreads Color
We began December with FN30 MBS yielding 3.87% (FNCL) and borrowers paying 5.19% for a moving average excess primary-secondary (xPS) spread of 4 bps. FNCL finished down 36 bps at 3.51% at the end of the month hitting the high of 3.87% on 12/1 and a low for the month of 3.51 on 12/31.
During December, rates finished the month down approximately 36 bps with FNCL starting the month at 3.87 and finishing the month at 3.51. FNCL started the month at the monthly high of 3.87 on 12/1 and then steadily decreased till 12/17 when FNCL dropped almost 15 bps in two days (3.78->3.63). FNCL stabilized around in the low 3.60 range before finishing the year at 3.51 after one of the worst Decembers on record for equities. With rates trending downwards, most originators saw stagnation or a slight up tick in production. Even with the recent drop in rates, most originators are still under capacity but that can be chalked up to the holiday season. Last month 24 lenders stated that they were under capacity with 5 saying they were severely under capacity. This month with rates decreasing, 6 originators stated they were severely under capacity, 6 significantly under capacity, and 13 slightly under capacity. December saw flat to small increases in production compared to November. 9 clients saw a small increase in production compared to 8 in November but 1 lender saw a significant increase in production compared to none in November. 19 of 28 clients reported that production was either flat, slightly down or significantly down. With reports of flat to slightly up production compared to November, reports of backlog increased slightly compared to last month with 4 survey receipts stating they had small backlog compared to 3 last month. Despite rates decreasing this month, reports of excess margin stayed the same. This month 8 clients reported having a little extra margin in their rate sheets compared to 8 clients last month.
We ended January 11th with FNCL at 3.51% and our moving average xPS spread at 16 bps. Next month, even if FNCL bucks course and trends upward again we are expecting to see xPS decrease and move closer to the 10-12 bp range as the recent drop in rates was large enough to create pro longed periods of excess margins.
– Mike Vough
Specified Pool Commentary
Central Bank policymakers are closing in on their first meeting of the year. At the end of 2018, Chairman Powell proclaimed the Fed would take a more “data –dependent” approach to any actions in 2019. However, they face an interesting predicament given the ongoing government shutdown, there is no data to evaluate. Key metrics such as GDP, retail sales and housing will be missing from their next meeting. One thing seems certain, Fed officials will not make any big decisions without having all necessary data points. Given the likelihood of no major movement by the Fed, all eyes will focus on post meeting statements and if any direction is given about the future for 2019.
The appetite for higher coupon specified pools continued for January. The appetite for FN30 5.0 Coupon saw the largest pickup month over month, averaging an 8 basis point gain across all pools. All other FN30 coupons saw sizable increases from December to January averaging a 5 basis point pick up. All pools across the 4.5 coupon stack experienced increases ranging from 5/32 to 4/32 expect. Similarly, higher coupons in FN15 (4.0) saw increases month over month, whereas lower coupons (2.5 – 3.5) experienced decreases. FN15 4.0 Coupon saw the largest increase, particularly the 125k pool, which increased by 9/32. All other pools in the FN15 4.0 Coupon saw an increases averaging 5 basis points.
– Brendan McPartland
Rates have declined as bonds rallied through the month of December and into January with FN30 Current Coupon dropping approximately 30 bps, and during this time we have seen a decline in MSR Rich/Cheap IRRs while the Best Efforts to Mandatory spread and generic name for cialis Gross Profit Margins have increased relative to December’s observations. MSR values have experienced a modest decline as aggregators strengthen their bid on servicing assets. The average IRR value was 6.92%, a -0.39% decrease compared to the December readings, with a peak value of 7.91% and a low value of 5.55%. In January we observed a widening of both Gross Profit Margins and the Conventional Best Effort (BE)/Mandatory Spread relative to last month. The peak BE/Mandatory Spread value was 47 bps and the trough was 30 bps, with an average value of 39 bps, which is a 3bps increase from our December readings. Profit Margins displayed an average reading of 201 bps (+5 bps increase relative to last month) with a peak of 226 bps and a trough of 167 bps.
The MSR Rich/Cheap gives the internal rate of return for retaining servicing and provides a general measure of how aggressive aggregators are in their servicing bid. If a client is considering retaining servicing, or is deciding between retaining or selling servicing-released on any given day, this number can serve as a guide. Compass uses best execution across aggregators each day for note rates bracketing the FN30NR. The Mandatory/BE spread tracks the difference of a representative seller’s basis point pick-up using mandatory delivery instead of best efforts. Compass uses several investors, for best efforts and mandatory, and compares the best execution of each of the two delivery methods for note rates flanking the FN30NR. The Conventional 30-year average gross profit margin tracks the originator’s gross profit margin, i.e. the difference between what the originator pays for the loan (what is posted on a rate sheet) and what the originator could sell the loan for into the secondary market.
– Sean Welsh
Production in the 30-day period ending January 15, 2019, decreased while rates traded in a wider range (36 bps range in this period versus 23 bps in the prior period), with the average yield decreasing month over month by 27 bps. Average volume for the last 30 days was 63% of our base volume (vs. 74% in the prior period) ranging from a low of 21% to a high of 86%. The average yield on the FN30 RNY in this period was 4.128% (vs. 4.402% in the prior period) ranging from a low of 3.949% to a high of 4.306%.