CCMBS Yields Hit April 2024 High as GSEs Ramp up MBS Buying
Current-coupon MBS yields peaked last week. GSEs are increasing purchases to offset declining holdings.
Key points
- CCMBS yields hit their highest level since April 2024 last week.
- FHFA director Bill Pulte confirmed that GSEs are ramping up MBS purchases.
- GSE holdings of Agency MBS declined over the past three months.
Current-coupon mortgage-backed security yields rose last week to their highest level since late April 2024. This increase occurred despite stable spreads against Treasury benchmarks.
Bill Pulte, director of the Federal Housing Finance Agency, stated that government-sponsored enterprises are increasing MBS purchases. This move aims to reverse a three-month decline in agency bond holdings.
Yields Reach Recent Peaks
Housing economist Tom Lawler noted that CCMBS spreads remained above the narrow range seen in recent months. The yield spike marks a significant shift from the previous stable period.
These market moves contrast with official narratives regarding housing affordability. Lawler argues that GSEs have simultaneously taken on greater risks while reducing their bond portfolios.
GSEs Increase Bond Purchases
Pulte posted on social media that Fannie Mae and Freddie Mac are buying large quantities of MBS. This statement directly addresses reports of shrinking government-backed bond holdings.
The agency director claimed that new home prices had dropped twenty to thirty percent recently. This assertion supports the rationale for the increased purchasing activity.
Risk Profiles Shift Upward
Lawler highlights a discrepancy between administration statements and actual market data. He points out that GSE risk profiles have worsened despite official claims.
The Substack analysis suggests that the recent yield increases reflect underlying structural changes. Investors should monitor these trends for broader implications in the housing sector.
