Mortgage-Backed Securities Insights — Week of May 11, 2026

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

Here we are in the middle of the traditional homebuying season, and 30-year mortgage rates are 6.375 to 6.5% — about 50 basis points higher than the low we had this year — and agency, as well as non-QM origination volume momentum, is steady. Agency origination remained at 3.6 billion per day for the first two weeks of May, and basis is back to a 111 basis points. That’s at the lower end of recent trading — stable and functioning.

As we trade the headlines, I thought it would be useful to reframe the mortgage market in the day-to-day terms we are now using as we trade the headlines. Off Ramp: The FOMC has now told us that they are on hold and prepared to stay that way for the rest of 2026. In fact, the futures markets are pricing in no cuts until late 2027. So, the FOMC can either do nothing, ease or they can hike rates — all options are covered there. 

Ceasefire: We have established ceilings on rates, with the two-year capped at 4%, the ten-year at 4.5% and the 30-year at 5% — sell-offs basically are respecting those boundaries. De-escalation: The jobs report last week, which showed an addition of 115,000 jobs, and the headline unemployment rate holding steady at 4.3%, seemed to indicate job growth is good, okay, steady. But is it? The household survey shows that actual employment is down 226,000, unemployment increased by 134,000 and net 188,000 people left the labor force. Does that sound like a growing jobs market or one that is stagnant? 

The demographic fact is that boomers are retiring and younger, less expensive workers are taking their place. That shows up in the muted nominal and real wage growth numbers over the last 14 to 18 months that seem to indicate that inflation is not pushing up wage growth. Demographics are playing a positive role here.

And finally, the market’s Iron Dome: Agencies are buying MBS at the wides and acting as the buyer of last resort. They still have $118 billion left of buying capacity under their $450 billion cap. Asset managers will continue to buy on dips. And let’s not forget the mortgage rates; there are now two originators increasing their bids to purchase Two Harbors. Dream Finders is bidding to buy Beazer Homes. Why? Because new home builders continue to offer incentives to move their inventory — they’re sacrificing their margins now to sell homes. 

This showed up in the data last month as new home sales increased and are now on target to increase totally by 1.3% in 2026. Thank you for listening. Please go to Texas Capital’s LinkedIn page for all your updates, until next time.