US: MNI POLITICAL RISK - No Clear Offramp To Avert Govt Shutdown

• MBA composite mortgage applications dipped -0.5% (sa) last week after -1.4% the week prior as they still holds onto most of its refi-driven 11% increase before that.
• New purchase applications increased 2.2%, their largest increase in a month, whilst refi applications fell another -3.5% after -3.1% following the 23% jump before that.
• Levels relative to 2019 averages: composite 58%, new purchases 63% and refis 51%.
• The 30Y conforming rate inched up another 1bp to 6.69% after the 6.67% two weeks prior was the lowest since early April.
• The spread to 10Y swap rates of 291bp saw a second week below the range of 300bp +/-5bp seen mostly since reciprocal tariff announcements in April vs 285bps averaged in Q1.
• Tsy Sec Bessent on Fox Business today said he doesn’t want a wider spread on mortgages vs Treasuries as part of discussions around Fannie Mae and Freddie Mac sales. He’s not sure on the timing of sales, with potential deal news sometime in September or early October.
• That’s similar rhetoric from a couple weeks ago when he said the White House wants to maximize value for the taxpayer and also keep the spread between mortgage rates and treasuries flat or even bring it down.
• To his point, spreads to 10Y Tsy yields (the usual point of focus) have been fairly stable around the 250bp level so far this year (latest 244bp) vs closer to 300bp in 2023. Alternatively, spreads to 30Y Tsy yields have fallen to 181bps most recently having started the year nearer 220bps amidst 30Y yields holding at elevated levels due to Fed independence concerns. 

• Secured Overnight Financing Rate (SOFR): 4.38% (+0.01), volume: $2.820T
• Broad General Collateral Rate (BGCR): 4.37% (+0.02), volume: $1.164T
• Tri-Party General Collateral Rate (TCR): 4.37% (+0.02), volume: $1.125T
• (rate, volume levels reflect prior session)

Finland has announced it will be looking to sell up to a combined E400mln of the following at its ORI Facility tomorrow, August 28:

• the 2.625% Apr-32 RFGB (ISIN: FI4000591862)
• the 0.125% Apr-52 RFGB (ISIN: FI4000480488)