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MRB Market - Spread Charts

These charts shows the spread between mortgage and bond rates as of 10/20/2011 based on weekly data from Freddie Mac and The Bond Buyer as shown on their web sites.

Historically, mortgage rates have been above tax-exempt bond rates. The spread (mortgage rates - bond rates) has been positive for many decades in the past.

Starting on October 09 2008, due to the financial crisis, those old relationships changed and were no longer valid. The spread briefly went negative for the first time in the history of the MRB market. Then, starting on November 27 2008 and for 41 weeks until September 10 2009, municipal rates (as indicated by the Bond Buyer 25 Revenue Bond Index) were higher than Treasuries and higher than mortgage rates. That was an unprecedented nine month period of negative spreads, until now. For the past 75 weeks (1 year, 23 weeks), the spread has been negative.

In the past 159 weeks (3 years, 3 weeks) there have been only 31 weeks of positive spreads (see chart).

This is a chart of the recent history since January 2007:

This is a chart of the long history from the start of the Freddie Mac data series in September 1979:

Click on the image to display a full size chart in PDF format.

Last Updated on Friday, 21 October 2011 21:39

MRB Market - Spread

For many decades, MRB issuers have been able to sell their tax-exempt bond offerings in the municipal market at interest rates below Treasuries. At the same time, mortgages were priced above Treasuries by 150 basis points (1.5%). The MRB spread (mortgage rates subtracting tax-exempt bond rates) was a healthy 150 to 250 basis points (1.5 to 2.5 percent), a positive spread.

That was then.

Starting on October 09 2008, due to the financial crisis, those old relationships changed and were no longer valid. The spread briefly went negative for the first time in the history of the MRB market. Then, starting on November 27 2008 and for 41 weeks until September 10 2009, municipal rates (as indicated by the Bond Buyer 25 Revenue Bond Index) were higher than Treasuries and higher than mortgage rates. That was an unprecedented period of negative spreads, until now. For the past 75 weeks (1 year, 23 weeks), the spread has been negative.

In the past 159 weeks (3 years, 3 weeks) there have been only 31 weeks of positive spreads (see chart).

This week, municipal rates, as indicated by the weekly Bond Buyer 25 Revenue Bond Index, are 5.07 percent (from 5.06 last week). Conforming mortgage rates as indicated by the weekly Freddie Mac Primary Mortgage Market Survey are around 4.11 percent (from 4.12 last week).

Freddie Mac PMMS as of 10/20/2011: 5.07%

Bond Buyer 25 Revenue Index as of 10/20/2011: 4.11%

Weekly MRB spread:
(negative 96 basis points)

-0.96%

To see a chart in PDF format click on the Rates and Charts menu > Historical Charts.

2011 2ndHalf	Spread	---	2011 1stHalf	Spread	---	2010	Spread
			2011-06-30	-0.83		2010-12-30	-0.52
			2011-06-23	-0.81		2010-12-23	-0.61
			2011-06-16	-0.82		2010-12-16	-0.65
			2011-06-09	-0.85		2010-12-09	-0.71
			2011-06-02	-0.78		2010-12-02	-0.71
			2011-05-26	-0.78		2010-11-24	-0.76
			2011-05-19	-0.79		2010-11-18	-0.86
			2011-05-12	-0.78		2010-11-11	-0.70
			2011-05-05	-0.74		2010-11-04	-0.47
			2011-04-28	-0.73		2010-10-28	-0.44
2011-10-20	-0.96		2011-04-21	-0.74		2010-10-21	-0.39
2011-10-13	-0.94		2011-04-14	-0.67		2010-10-14	-0.38
2011-10-06	-1.10		2011-04-07	-0.74		2010-10-07	-0.31
2011-09-29	-1.00		2011-03-31	-0.70		2010-09-30	-0.27
2011-09-22	-0.87		2011-03-24	-0.71		2010-09-23	-0.21
2011-09-15	-1.02		2011-03-17	-0.74
2011-09-08	-0.95		2011-03-10	-0.64
2011-09-01	-0.93		2011-03-03	-0.69
2011-08-22	-0.91		2011-02-24	-0.62
2011-08-18	-0.95		2011-02-17	-0.60
2011-08-11	-0.77		2011-02-10	-0.62
2011-08-04	-0.82		2011-02-03	-0.82
2011-07-28	-0.77		2011-01-27	-0.81
2011-07-21	-0.80		2011-01-20	-0.92
2011-07-14	-0.79		2011-01-13	-0.89
2011-07-07	-0.76		2011-01-06	-0.67

Last Updated on Friday, 21 October 2011 21:37

Freddie Mac Mortgage Survey

Freddie Mac publishes the results of their weekly Primary Mortgage Market Survey usually on Thursday mornings. It is a widely followed index that is quoted and referenced by many news articles. The rate for 30-year, fixed rate mortgages, as published 10/20/2011, is 4.11 % (from 4.12% for the prior week).

See Bloomberg's quote ( http://www.bloomberg.com/apps/quote?ticker=NMCMFUS%3AIND )
and Bloomberg's chart ( http://www.bloomberg.com/apps/cbuilder?ticker1=NMCMFUS:IND )

Take a look at the Freddie Mac web site for further details (www.freddiemac.com).

Last Updated on Friday, 21 October 2011 21:30

The Bond Buyer 25 RB Index

The Bond Buyer published 25 Revenue Bond Index that consists of 25 municipal revenue bonds. It is published weekly, on Thursday, after the market close. The bonds in the index have 30-year maturities and are rated A1 by Moody's or A+ by Standard & Poor's.

The rate, as published 10/20/2011, is 5.07% from 5.06% in the prior week.

For a historical chart of the RBI rates see this chart: Bloomberg.
Take a look at The Bond Buyer web site for further details (www.bondbuyer.com).

Last Updated on Sunday, 13 November 2011 13:02

Rate Indicators Chart-Recent

This chart starts with January 2007 and shows interest rates as of 10/21/2011.

The MRB industry is varied and complex such that no limited set of indicators can provide a complete picture of the history of this important market. It is important to view a number of indicators to get a sense of the market trends over time.

The general level of mortgage rates is indicated (green) by the rate published in Freddie Mac's weekly Primary Mortgage Market Survey (PMMS). The general level of tax-exempt borrowing rates (blue) is indicated by the Bond Buyer Weekly 25 Revenue bond index. Two Treasury rates, the 10-year and the 6-month, are also shown.

Click on the image to display a full size chart in PDF format.

Last Updated on Friday, 21 October 2011 21:29

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Morrevbon® LLC

MRB Market - Spread Charts

MRB Market - Spread

Freddie Mac Mortgage Survey

The Bond Buyer 25 RB Index

Rate Indicators Chart-Recent

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