EU CREDIT UPDATE: EU Market Midday

MBA mortgage applications fell further over a two-week update although the data should be taken with caution over the holiday period. With that caveat in mind, there was another notable narrowing in mortgage swap rate spreads. 

• The two-week update saw MBA composite applications increase just 0.3% in the latest week after a -10% drop in the week to Dec 26 around Christmas (all seasonally adjusted).
• The details include renewed weakness for new purchases as they continue to reverse earlier optimism seen in the second half of November. New purchase applications fell -6.2% after -0.1% for a cumulative 14% decline since late Nov.
• Refi applications meanwhile increased 7.4% after a heavy -19.6% the previous week.
• These weekly values should be taken with caution around the holiday period but for now, it sees composite applications at 56% of average 2019 levels for their lowest since August.
• New purchases stand at 61.5% (lowest since mid-Oct) and refis stand at 53.9% after the 50.2% the week prior was its lowest since Aug.
• This two-week weakness came despite a further decline in mortgage rates, including -7bp in the latest week to 6.25%, lowest since the three weeks between 6.13-15% in Sep 2024 and last lower in early 2023.
• A yet further narrowing in mortgage rate to funding spreads is helping lower mortgage rates, with the 30Y conforming to 10Y swap rate spread lowered again to 247bp last week vs 255bp in the previous update for fresh lows since early 2022.
• It compares with the peak of 315bp in May in post-tariff disruption, 285bp averaged in 1Q25 and 302bp averaged in 2024. 

• +50,000 TYH6 114 calls, 11 ref 112-18 (expire Feb 20), open interest 86,001 coming into the session.
• This after paper +40k TYG6 114 calls yesterday at 2. Likely the same account that built massive OTM 10Y call positions since November that have since expired (over 100k TYF6 114 calls for example).

"Today the coupon for the new 5-year benchmark bond of the Dutch State has been set at 2.50%. The DSTA will launch the new bond [via auction] on Tuesday 13 January 2026 through the MTS platform. The bond matures on 15 January 2031."

• ISIN: NL0015073TQ2