Refi Boom May Boost Rate Buying

A refinancing boom caused by rallying Treasuries could in turn spark more buying of interest-rate swaps and Treasuries as investors hedge against prepayment risk in the mortage-backed securities market.

  • 03 Jun 2005
Email a colleague
Request a PDF

A refinancing boom caused by rallying Treasuries could in turn spark more buying of interest-rate swaps and Treasuries as investors hedge against prepayment risk in the mortage-backed securities market. If mortgage rates fall to levels seen in the refi boom last March, investors could buy $45-$72 billion in 10-year interest rate swaps or Treasuries, estimated Adama Kah, mortgage strategist at Credit Suisse First Boston.

Mortgages rates are already nearing 5.55%, a 12-month low, which could jumpstart some of the buying. But if 10-year rates fall another 25 basis points (they were at 3.9% on June 1) and mortgage rates fall to last March's low of 5.38%, the MBS market could be hit with a redux of that refi boom, Kah said. Mortgage rates, which are priced at a spread to 10-year Treasuries, fell to 5.58% on June 1. To be sure, Kah cautioned against predicting another 25bp fall in Treasury yields as rates have just broken the 4% barrier.

As mortgages are called away and their portfolio duration shortens, portfolio managers may buy 10-year Treasuries or interest-rate swaps to lengthen duration. Interest-rate swaps have been the extension vehicle of choice in the mortgage market for the past few years, Kah said.

  • 03 Jun 2005

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 300,564.69 1167 8.07%
2 JPMorgan 292,705.55 1273 7.86%
3 Bank of America Merrill Lynch 274,298.19 930 7.36%
4 Barclays 227,796.85 849 6.12%
5 Goldman Sachs 201,953.92 668 5.42%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 BNP Paribas 43,084.26 173 7.10%
2 JPMorgan 38,694.99 77 6.38%
3 Credit Agricole CIB 32,927.59 157 5.43%
4 UniCredit 32,342.86 144 5.33%
5 SG Corporate & Investment Banking 31,187.44 119 5.14%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 12,840.88 54 8.97%
2 Goldman Sachs 12,059.06 58 8.42%
3 Citi 9,451.48 53 6.60%
4 Morgan Stanley 8,054.41 48 5.62%
5 UBS 7,829.15 30 5.47%