ARM Update

May 21, 2018

Yield spreads between hybrid ARMs and Treasuries were 1 to 2 basis points wider on the week, as the curve shifted higher, with intermediate- and long-term yields leading the way (10-year Treasury yield reached a seven-year high).

In the secondary market, we observed some seasoned selling in ARMs, primarily a mix of lower coupon, 60-70 MTR 7/1s and 10/1s.  On the demand side, there was continued buying in new issue 5/1s and 7/1s, which has generally been the trend this month.  Despite current coupon fixed-rate MBS cheapening during the past few months, new issue ARMs continue to offer relative value in terms of option-adjusted spread and price risk.


Last week, activity was primarily focused on the following:





Michael S. Erhardt, CPA

Senior Vice President

Investment Strategist

Vining Sparks, IBG

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