Trading Desk Talk

Fighter

The world’s greatest athletes have descended upon Milan and Cortina d’Ampezzo, Italy in search of immortality and a gold medal. The recent runup in spot metals prices also means that this year’s Olympians can earn the most expensive medals in the history of the games. While gold medals are only comprised of roughly six grams of pure gold out of the medal’s total 506 grams, the remainder is made of silver, which has also skyrocketed recently, leaving about $1,000 in pure gold and another $1,300 in silver—equating to a whopping $2,400 per medal (Figure 1).

In her 2002 hit “Fighter,” Christina Aguilera sang that a difficult experience “makes me that much stronger, makes me work a little bit harder, makes me that much wiser.” Olympic athletes, however, aren’t the only ones who can draw inspiration from Aguilera’s resilience; so, too, can our market, which is finally showing signs of improvement after a long period of underperformance.

April 2, 2025—also known as “Liberation Day”—marked the local wides for our market, from a spread perspective, since the regional banking crisis of 2023. (That crisis also cast a negative view of project loans among market participants.) After underperforming on a relative basis for years, Ginnie Mae project loans have finally gained some traction. Part of the recent outperformance is, no doubt, due to the social media post from President Trump, who announced that the government-sponsored entities will embark on a $200 billion spending spree to support the housing market.

Real estate mortgage investment conduit (REMIC) sales—or sales of the tranched product using a collection of individual loans as collateral—have become less unloved recently, too. The January cycle, for example, had 11 REMIC deals totaling over $2 billion. We heard from our trading partners that these deals were met with strong demand, and most are already cleaned out of inventory.

Figure 2 charts generic Ginnie Mae and Fannie Mae spread compression, relative to their respective widest point following Liberation Day, to illustrate GNMA outperformance—both on an absolute and relative basis; GNMAs are approximately 60 basis points (bps) tighter, while FNMAs are about 37 bps tighter, marking a 23-bps outperformance for the former.

Federal Housing Administration (FHA) borrowers have doubly benefited from the spread compression, combined with a rally in Treasuries (Figure 3). While recent weeks saw a selloff, borrowing rates are now generally lower and are approaching the bottom of the range not seen since early 2023.

The collective purging of inventory was a welcome sign, as bloated dealer balance sheets have been a headwind for our market for some time. To some extent, even elevated levels of inventory are sustainable, as long as there isn’t a moment that investors become forced sellers. Risks remain, however, because the clearing of inventory wasn’t huge by any means. Figure 4 shows that balance sheets are still very full, at around $16.6 billion in holdings of agency and government sponsored enterprise (GSE) commercial mortgage-backed securities to date.

For now, our market seems to be coming out of a long period of weakness and is showing some green shoots: The structural landscape of a steeper yield curve, perceived lower rates, and higher investor demand all point to a long overdue rebound. Indeed, our market and its investors have endured bank failures, spread widening, higher rates, government shutdowns, and geopolitical turmoil. “So, thanks for making me a fighter,” as Aguilera sang, remains as inspiring as ever.

FROM THE DESK

Agency CMBS — While this Talking Points was mostly dedicated to the recent reversal of longer-term weakness, we’re now in a bit of a short-term technical retracement of strength. Ginnie Mae spreads were approximately two basis points wider for the week, as some February REMICs have not followed the high demand of the January cycle. DUS volumes last week came in at ~$835 million, which was light. Spreads were largely unchanged.

Municipals — AAA tax-exempt yields decreased slightly at the front end and intermediate part of the curve and were flat thereafter on a week-over-week basis. Issuance for January was just over $34 billion, which was down 7.2% from a year ago. However, volume for January 2026 was the third highest monthly figure for January (10-year average is $29.6 billion). Municipal bond funds saw their sixth consecutive week of inflows to start the year—totaling $2.4 billion for the week and $8.9 billion year to date, including $564 million directed toward high-yield funds last week. The market continues to see strong bond inflows on a weekly basis, with the average weekly inflow for 2026 at just over $1.4 billion.

The information contained herein, including any expression of opinion, has been obtained from, or is based upon, resources believed to be reliable, but is not guaranteed as to accuracy or completeness. This is not intended to be an offer to buy or sell or a solicitation of an offer to buy or sell securities, if any referred to herein. Lument Securities, LLC may from time to time have a position in one or more of any securities mentioned herein. Lument Securities, LLC or one of its affiliates may from time to time perform investment banking or other business for any company mentioned.