ARM Update

February 5, 2018



Most mortgage-related sectors experienced some degree of spread widening in the face of the bond market sell-off in recent trading sessions.  However, yield spreads on new-issue hybrid ARMs to Treasuries have tightened approximately 1 to 2 basis points over the past two weeks.  The performance speaks to the traditional tendency for investors to favor variable-rate and/or lower duration products when interest rates begin a rather rapid ascent.

Activity last week was primary focused on the following:

There was some selling in the secondary market of moderately-seasoned 7/1s (5/2/5 cap structure) with approximately 60-months to the reset date.

Finally, new issuance for January totaled $1.5 billion vs $1.7 billion for the previous month.  Approximately 65% of the supply in January was made up of 5/1s and 7/1s, and 7/1s lead all categories with $587 million in production.

 

 

 

Metrics for some commonly traded structures are below:





 




 

 


Michael S. Erhardt, CPA

Senior Vice President

Investment Strategist

Vining Sparks, IBG

INTENDED FOR INSTITUTIONAL INVESTORS ONLY.
The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Copyright © 2021
Member FINRA/SIPC
This is a publication of Vining-Sparks IBG, L.P.
775 Ridge Lake Blvd., Memphis, TN 38120