Mortgage-Backed Securities Insights — Week of July 13, 2026

Hi, I’m Jerry Levy, Managing Director of Texas Capital’s Mortgage Security Sales and Trading.

Existing home sales in June — down 2.4% to an annual rate of 4 million units — along with a 1.8% increase in the national median home price to an all-time high of 440,600, confirmed the fourth year of the affordability crisis. 

But there is some good news, at least for the housing market moving forward: Over the weekend, the 21st Century ROAD to Housing Act came into law with its structural and regulatory reform supporting housing — specifically aimed at first-time homebuyers — and regulatory reform directed at the residential market, such as providing guiderails for institutional owners of single-family homes. They can buy and sell amongst themselves; they can continue to invest in new homes for rent; they can continue to renovate homes in substantial need of repair. Permitting reforms and easing of regulations on community lenders will also provide savings to first-time homebuyers. As my colleague Steve Orr has emphasized, the Fed is more hawkish, inflation is elevated and the economy is resilient. 

Today, however, oil is up 4% as the ceasefire is over and a new embargo of the Strait of Hormuz is in effect. Will we have another TACO? Perhaps. At $75 a barrel, WTI is closer to the 68 low of last week, rather than the $100 year-to-date high. The other large inflation driver since Liberation Day, obviously, has been tariffs. The New York Fed study, released at the end of last week, concluded that just 47% of firms overall expect to raise prices going forward due to tariffs, meaning the tariff inflation pull-through that we have been experiencing is, quote, “mostly played out” in the words of New York Fed President John Williams. Sure, there are still increases projected in the pipeline, but many respondents now see these as spread out over time and not as one-offs. 

CPI is released tomorrow: May’s readings were headline 4.2% and core was 2.9%. Look for June’s headline to trend lower and for core to remain the same at 2.9%. This rate and curve outlook favors agency and jumbo ARMS issuance going forward. A five-year ARM is now 3/8 to 50 basis points lower than a 30-year fixed, and that is attractive given the probability of a chance to refi at a sub 6% rate happening in the next five years. It’s worth considering.

To that point, with 30-year rates at 6 5/8 to 6 3/4, and the Fed hawkish — Chairman Warsh addresses Congress, by the way, this week in his first annual testimony — look for him to repeat the FOMC’s priority being price stability. The curve is set to flatten further with a two-year at a year-to-date high of 4 1/4 today — that’s the pivot as ten-years have a 4.70 and long bonds, 5 1/8 resistance levels. That’s going to be supported by preemptive Fed actions. Chairman Warsh believes that productivity gains from the AI revolution will soon become evident. The big question will then be at what cost will that be to jobs, job growth and employment?

Thank you for listening. Please go to Texas Capital’s LinkedIn page for all our updates; until next time.