US DATA: Mortgage Rate Lending Standards Tighten A Little Further
MBA composite mortgage applications unsurprisingly received a boost from lower rates this week although there was limited passthrough to mortgage rates in a further tightening of lending standards.
- Composite applications increased 11% last week (sa), leaving them back close to where they were in late March having jumped 20% in the first week of April as rates tumbled following Apr 2 tariff announcements before subsequently declining 23% over the next three weeks.
- The breakdown by new purchases and refis follows a similar pattern, just with refis mostly more volatile.
- A reminder of relative levels: composite applications at 53% of 2019 levels, new purchases at 63% and refis at 42%.
- The 30Y conforming rate fell 5bp last week to 6.84% (lowest since week of Apr 11) vs a 13bp decline in the average 10Y swap rate through the week (although the average of 3.69% came with a wide range of 3.59-3.79%).
- The 30Y conforming to 10Y swap spread of 315bp is up from sub-280bps in late February for its highest since Feb 2024.
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SPAIN AUCTION PREVIEW: On offer this week
Tesoro Publico has announced it will be looking to sell a combined E5.5-6.5bln of the following Bono/Oblis at its auction this Thursday, April 10:
- the 3.50% May-29 Bono (ISIN: ES0000012M51)
- the 2.55% Oct-32 Obli (ISIN: ES0000012K61)
- the 3.15% Apr-35 Obli (ISIN: ES0000012O67)
Tesoro Publico has additionally announced it will be looking to sell a combined E5.5-6.5bln of the following letras at its auction tomorrow, April 8:
- the 6-month Oct 10, 2025 letras
- the new 12-month Apr 10, 2026 letras
US TSY FUTURES: BLOCK: Jun'25 2Y Sale
- -2,500 TUM5 104-06.62, sell through 108-75 post time bid at 0738:00ET, DV01 $92,000. The 2Y contract trades 104-07.38 last.
GERMANY: Public Sector Deal Supports Slowing Negotiated Wage Growth Expectations
Wage negotiations in the public sector (federal and municipal level, impacting 2.7mln employees, ~6% of total employment) ended with a two-stage salary increase of 3% or a minimum of E110/month retroactively starting on April 1, and a further 2.8% starting May 1 2026, alongside some shift allowance increases and a softening of the maximum working hours in a 27-month contract maturity in March 2027.
- UBS calculates that the public sector wage deal equates to average annual wage growth in the sector of 2.8% in the next two years. We note that this is higher than:
- average Y/Y services sector negotiated wage growth 2011-19 (2.4%)
- the Bundesbank's forecast for German negotiated wage growth in 2025 (2.5%)
- the Bundesbank's forecast for German HICP (2.4% '25, 2.1% '26).
- However, the figures still mark a slower pace of wage growth than seen in recent quarters (services sector excl. one-offs standing at 4.7% Y/Y in March according to Destatis data, see chart below).
- Thus, the takeaway from the deal is that it appears to underpin the ECB's assumption of Eurozone wage growth tapering off going forward - but for the Bundesbank's 2025 forecast to be met, other deals this year have to come in lower than this one, and this agreement remains above pre-pandemic norms.
