TRADEX GLOBAL
INTERNAL COMMENTARY
US
mortgage applications fell 3% last week according to MBA. The refinance
component fell 5% in the latest week and is continuing its trend of decreasing
refinancings. MBA also reported a 2% rise in the “purchase” index from the
previous week. The share of applications to refinance an existing mortgage was
down to 67%, this is the lowest level we have seen in months. The average rate
on a conforming 30 year fixed rate mortgages was 4.46%, the highest rate since
August 2011, up from the previous week of 4.17%. I have been saying the
greatest refinance wave in history was close to the end and with this report
from MBA I am more convinced whoever could have refinanced or wanted to
refinance had already done so. For all others it may be too late to take
advantage of those rates from earlier in the year. Owning IO (interest
only) securities has been difficult, but now the upside to this positively
convex security is looking very good. We are not seeing price appreciation so
far this month, but we believe it is only a matter of a month or two before we
see gains in IO's. We felt some pain in 2008 and were a little early to
increase our IO allocation, but with more than a 100% return from our IO
investments we were more than rewarded!!. The general improving fundamentals in
real estate have been great for our non-agency RMBS and CMBS securities,
although there was some volatility as the Fed announced “tapering”. We are
constructive in both sectors and believe the bout of volatility was a good
opportunity for our managers to add on to existing securities at slightly
better prices. Keep nimble – Michael Beattie
EXTERNAL
RESEARCH COMMENTARY
The total number of
mortgage applications filed in the U.S. last week slipped 3% from the prior
week as interest rates jumped, the Mortgage Bankers Association said
Wednesday. The refinance index fell 5% for
the week ended June 21 from the previous week, according to the weekly survey
covering more than three-quarters of all U.S. residential-mortgage
applications. MBA also reported the seasonally adjusted purchasing index rose
2% from a week earlier. Interest rates have increased in recent weeks amid
stronger economic data, curbing some individuals' appetite to buy a new
home. "Interest rates moved up sharply following the Federal
Reserve's press conference last Wednesday where it was indicated that the Fed
could begin tapering their asset purchases later this year," said Mike
Fratantoni, MBA's vice president of research and economics. "Mortgage
rates increased by the most in a single week since 2011, and
refinance-application volume dropped to its lowest level in almost two
years." The share of applications filed to refinance an existing
mortgage decreased to 67%, the lowest level since July 2011, from the prior
week's 69%. Adjustable-rate mortgages, or ARMs, made up 7% of total
applications. The Home Affordable Refinance Program share of refinance applications
slipped to 30% from 31% in the prior week. The average rate on 30-year
fixed-rate mortgages with conforming loan balances increased to 4.46%, the
highest rate since August 2011, from the prior week's 4.17%. Rates on similar
mortgages with jumbo-loan balances rose to 4.52%, the highest rate since March
2012, from 4.23% a week earlier. The average rate on 30-year fixed-rate
mortgages backed by the Federal Housing Administration jumped to 4.2%, the
highest rate since August 2011, from 3.85% a week earlier. The average
rate for 15-year fixed-rate mortgages climbed to 3.55%, the highest level since
November 2011, from 3.3% a week earlier. The 5/1 ARM average rate rose to its
highest level since October 2011, jumping to 3.06% from 2.81% a week earlier.
Tradex Global Advisory Services, LLC
investorrelations@thetradexgroup.com
203-863-1500
@Tradex_Global
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