Any potential ending of the government-sponsored enterprise conservatorships will have little effect on mortgage rates and mortgage-backed securities spreads in the near-term, said BTIG analyst Eric Hagen.
Several factors influence mortgage rate movements, including MBS pricing, as well as the 10-year Treasury yield. Based on data from Optimal Blue and Yahoo Finance, the spread between the 10-year yield and the 30-year fixed rate mortgage on Nov. 12 was still abnormally wide at 250 basis points.
Mortgage rates have
That was true late last week (Hagen's capital markets data is as of Nov. 8), but changed on Nov. 12.
In the immediate aftermath of Pres.-elect Trump's victory on Nov. 5,
But on Nov. 12, the next full trading day, the 10-year was back up to 4.43%; at noon the following day, it was at 4.42%.
At the same time,
While the election results improve the chances for the Fannie Mae and Freddie Mac conservatorships to end, the immediate impact on mortgage rate activity will be minimal, Hagen said.
"The likelihood improves for the GSEs to get pushed toward a recapitalization and release from conservatorship under Trump's administration (hence
Rate and volume-driven "macro headlines," and projections for Treasury bond supply remain the near-term drivers for how MBS spreads will move.
A stronger catalyst for spread movement would be the Federal Reserve
"Seeing the Fed follow-through with its rate cut last week was supportive for near-term earnings in the non-banks, at the same time we think stock valuations could respond to some spread widening we're bracing for if expectations for the Fed to cut next year are walked-back even further," he noted.
Even as expectations for the Federal Open Market Committee remain for another 25-basis-point reduction in short-term rates at its December meeting, future cuts are now uncertain following the election results and a Republican sweep, the November
Investors are concerned about the return of inflationary pressures under the likely economic program the new government will look to implement.
The current consensus average for the economists surveyed for the BCEI is for 108 basis points of additional cuts in the Fed Funds Rate during 2025.
"Now, by contrast, the futures market is anticipating only 77 basis points of rate cuts during 2025, with the end-2025 rate-cut expectations having fallen 9 basis points in a single day following the national elections," Wolters Kluwer said.
Lower jumbo rates during September, before the post-FOMC meeting rise in 10-year Treasury yields helped October's private-label MBS activity, a Morningstar DBRS report said.
During that month, jumbo rates fell 34 basis points, the Optimal Blue data showed. However, in October and early November, jumbo rates have moved similarly to conforming rates and at one point broke back above 7%.
Approximately $17.6 billion of deals were priced in October, making it the robust month of the year so far for activity, topping September's $16.3 billion, the rating agency said.
Year-to-date, private-label RMBS pricing volume is over $114 billion,