July 23, 2018
Because they trailed fixed rate MBS in terms of recent yield spread tightening, ARMs improved versus the balance of the mortgage sector in terms of relative value. This apples to the whole ARM sector, with 5/1 and 7/1 conventional offerings providing the most notable opportunities.
Last week, notable ARM market activity included the following:
- Lower coupon and lower dollar price seasoned 5/1 and 7/1 pools with first resets in approximately two years. Most had coupons in the 2.20-2.60% range.
- Approximately two year old 7/1 hybrids with slightly wider spreads and lower prices than new production 5/1 pools.
- Newer production 10/1 pools offering book yields in the 3.15% to 3.20% range, which compare favorably to new 15yr pools in terms of yield, price volatility, and cash flow.
Director of Investment Product Strategies