After shrinking steadily since late May, the spread between the 30-year fixed rate mortgage and the 1-year adjustable rate mortgage grew to its highest in a month. The 30-year rose 9 basis points to 5.81% while the 1-year fell 8 points to 4.19%.
Could it have something to do with this?
Freddie Sees Record Asian Demand: The GSE's $3B in 5-yrs saw Asian investors score a record 40% of the 4% reference notesStrong demand from Asia for those new 5-year agency bonds means lower rates on short-term ARMs.
But who in Asia? Private capital, which net sold agency bonds in September? Or central banks, which are markedly losing interest in 5-year treasuries but may be happy to pour even more money into 5-year mortgage backed securitites which, as Freddie Mac itself points out, are yielding 30.5 basis points more?
Thanks for the heads up to glory posting at Brad Setser's site.