Enhanced activity in the mortgage market because the GDP revision July 29 has developed a noticeable gap between the Major (borrower) market place and the Secondary (Investor) market place, as indicated by the wider “spread” proven in Fig.1. You’ll see it’s now almost twice as broad as it was prior to the release, and it’s at the the highest ranges we have seen since Oct. 2010.
It was shortly soon after the last spread widening that we saw prices increase from 4.20% on Nov 20 to five.19% on Dec 15. The magnitude and the fast pace of that rate increase caught several market place participants by surprise.
“Current Coupon,” as shown below, is represented by the yield on securities assured by Fannie Mae. Loans made to borrowers represented by “30yr Fixed” are eventually packaged into these securities. The “spread” indicates that rates to borrowers could have declined even more than their existing levels but instead have remained elevated (regardless of falling) simply because …
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