Don’t stop thinkin’ about tomorrow — As Fleetwood Mac famously croons, “Don’t stop thinking about tomorrow, it’ll soon be here…better than before.” The year so far has been marked by an onslaught of changes, both here and abroad, in the political and economic spheres: new leaders have taken office, a wave of executive orders were signed, a trade war was launched, and deals were struck. The year has been a volatile one to say the least, and we’re only five months in. With that, despite Fleetwood Mac’s advice to “not look back,” we thought it prudent to reflect on where spreads stand now, compared to where they started 2025.
Begin with Treasuries. The 10-year Treasury has traded between a wide range—3.90% to 4.80% yield (Figure 1). This past week, the yield ascended as markets settled back in to more of a “risk-on” atmosphere, after the tariff shocks of April.
With the increased volatility in rates, markets have continued to adjust their expectations of a rate cut by the Federal Reserve. The probability of a cut in June are now below 10%. Meanwhile, the probability of a cut in September is currently 50%. Earlier this week, Chicago Fed President Austan Goolsbee said, “If we could get the dust out of the air, it would make sense to think that rates would be going down. But the bar for action has to be high when there’s so much uncertainty.” Similarly, Powell recently said that there is “no real cost” to the wait-and-see policy the Fed currently employs.
Next, let’s consider how mortgage-backed security coupons changed throughout the year—and how those changes have affected trading volume. The figures below highlight the relationships between the Fannie Mae DUS 10/9.5 coupon and Ginnie Mae permanent loan coupon and the 10-year Treasury yield.
Elevated Treasury yields and, thus, coupons—have applied pressure to new-issue volumes. Fannie Mae volume has held up well, despite volatility in the market. Figure 4 highlights Fannie Mae’s monthly business volume report for the first four months of 2025: volume was $17.5 billion, compared to $12.7 billion for the same period last year.
Figure 5 shows Federal Housing Administration (FHA) multifamily volume, compared to the first three months of last year. Unlike last year, origination in 2025 is trending upwards, although origination volume remains lower than ideal.
Finally, Figure 6 compares changes in spreads for Ginnie perms, DUS 10/9.5, and the 10-year Treasury note yield. Since January, spreads have continued to widen. The largest spike in spreads occurred after “Liberation Day” on April 2. By the beginning of May, DUS 10/9.5 spreads had widened by about 18 basis points (bps); since then, FNMA spreads have remained elevated but are trending back toward pre-Liberation Day levels.
FROM THE DESK
Agency CMBS — Fannie Mae DUS volumes for the week were on track, with the four-week trailing average of $821 million. Wednesday’s selloff made for a quiet latter half of the week. Investor demand remains strong for FTIO deals. Discount bonds also traded very well. Many deals with wide-window yield maintenance saw solid demand. Ginnie Mae demand remains muted, as investors continue to have trouble moving REMIC bonds. Healthcare loans continue to make up a large percentage of deals coming to market (30-40%)—and, thus, tend to trade several bps wider than multifamily loans.
Municipals — AAA tax-exempt yields were relatively flat on the front end of the curve and higher on the long end of the yield curve, week over week. While primary new issuance was more than $14 billion last week, it was fairly quiet in the housing space, where only two multifamily deals priced. Municipal bond funds had a third straight week of inflows, with $769 million arriving (year-to-date inflows of $3.55 billion), while the high-yield fund sector also had inflows of $140 million.
