On Friday, mortgages finished the day little changed versus treasuries, but outperformed on the whole for the week. Mortgages traded tighter in the morning as the momentum from Thursday’s trading continued. The performance was helped by lighter origination supply that is typically indicative of a slower summer Friday. Supply increased a bit in the afternoon as customers covered their positions heading into the weekend, which pushed mortgages off the tights of the day. Total origination supply was estimated at ~$5B for the session, which was decidedly the lightest day of the week and well below the $7.7B per day average of the previous week. In Fed activity, they supplemented the demand side of the equation and purchased ~$5.3B of 30yr conventional and government securities. They are scheduled to purchase ~$4.5B of conventional 15yr and 30yrs today. At 5:00pm, 30yr UMBS 2.0s in August were +0.5/32 (101-22) and 15yr UMBS 1.5s in June were +2.5/32 (101-23).

On the origination front, 30yr primary rates were lower on the week. The prevailing 30yr primary rate is ~3.0%, but there are more and more originators now offering sub-3.0% rates. At 3.0%, the primary/secondary spread is currently 128bps, which is certainly tighter week over week as lenders start to pass through the impact of the AMRF retirement. The primary/secondary spread is the difference between the prevailing primary rate and the interpolated MBS par coupon. This measure is used as a rough proxy for a lender’s margin and used to track trends and relative movement.

This morning, treasuries are trading a bit higher across the curve in front of the day’s activity. Currently, the 2yr is +0.25/32 (0.196) and the 10yr is +11/32 (1.245).

From Elliot Eisenberg, the Bowtie Economist: Retirement Reckoning – Two reasons for the worker shortage that get little attention include retirements and business formation. From 2012 through 2019, annual retirements averaged about 2 million/year. In 2020, 3.2 million workers retired! In 2018 and 2019, business applications were 3.5 million/year. In 2020, 4.4 million, and through 5/21 2.5 million, a 6 million/year pace. Worse, the Labor Department’s monthly jobs report does a poor job counting staff at newly established firms.

Outrageous Orbiting – The Friday File: According to some astronomers, space begins at the exosphere, the outermost layer of the atmosphere, about 435 miles high. According to most, it’s the Karman Line, 62 miles above Earth, and beyond which lift from the air can no longer keep winged craft aloft. To the FAA, it’s just 50 miles. Branson’s 90-minute trip took him 50 miles high. Bezos reached the Karman Line, 11 minutes roundtrip.