Mortgage-Backed Securities Insights — Week of March 23, 2026

Hi, I'm Jerry Levy, Managing Director of Texas Capital's Mortgage Securities Sales & Trading.

Overnight, treasury yields are lower. The two year's at 3.83%, the 10-year 4.34% and the bond is down to 4.91% as risk assets rebound on the headline hopes of reopening the Strait of Hormuz. Oil is down $9. This is because of the Trump five-day moratorium on the proposed strikes on Iranian energy assets. This has become a question about the Strait of Hormuz reopening. Equities in the U.S. dollar are trading higher with gold and the U.S. dollar declining, as the market is subject to trading these news headlines.

What does this mean to our markets? The MBS basis, which opened this morning at 125 basis points, is 10 basis points tighter than when we closed on Friday. That's because of the weekend announcement by Fannie and Freddie to buy large amounts of MBS. And this is being done at the wides. This follows President Trump's January 2026 $200 billion Agency MBS buy order, which has still not been completed. For our market, this is good news.

Last week, the Fed also announced new capital requirement proposals, which will significantly reduce the amount of tier one capital that banks will be required to hold. Bloomberg reported that, "If finalized, the plans, along with the moves to ease the enhanced supplementary leverage ratio and overhaul stress tests, would amount to some of the biggest bank-capital rule changes since those enacted following the 2008 financial crisis."

Banks will also adopt a standardized approach to how they will report their mark to market losses in their hold to maturity portfolios, as well as increasing the attractiveness of holding RMBS. The Fed, also last week in the FOMC meeting, stayed on hold. Their projections officially say one more rate cut this year. Fed Governor Stephen Miran was the lone Fed dissenter, as he wanted a 25 basis point cut immediately. Twelve Fed officials are anticipating one cut in 2026, seven seeing none. Significantly, the market is actually pricing in a hike in 2026. And believe it or not, it's at 20% for April's meeting. The implications of developments in the Middle East for the U.S. economy are uncertain, the Fed said, with inflation pressures increasing.

On a final note on the Fannie/Freddie conservatorship and IPO, Fannie Mae equity hit under $4 a share last week, and this is from a $16 high last year, on renewed pessimism that there will be any imminent IPO or change in conservatorship. Thank you for listening. Until next time.