ARM Update

November 13, 2017

Yield spreads for new-issue hybrid ARMs to Treasuries remained stable for the second consecutive week, as the overall bond market traded in a narrow range that resulted in minimal increases to yields.

Activity last week included the following:

There is continued demand for seasoned G2 ARMs with a weighted-average loan life of 70+ months. Bid indications are strong for pools with reasonable speeds and suitable loan counts.   This is a good opportunity for investors seeking liquidity.

The October prepayment activity report was released last week.  Overall, speeds were in-line with expectations as the changes were mostly related to the increase in the number of days in the month.  In aggregate, FNMA ARM speeds were up 1.2CPR to 22.2CPR (5.7% increase). LIBOR-based Fannie 5/1s increased 0.8CPR to 26.6CPR, 7/1s increased 1.0CPR to 18.8CPR, and 10/1s rose 2.3CPR to 16.2CPR.  Prepayments for LIBOR-based Freddie securities were more subdued as 5/1s, 7/1s, and 10/1s paid 27.4CPR (0.1CPR), 18.7 CPR (0.6CPR), and 14.0CPR (0.1CPR), respectively.



Metrics for some commonly traded structures are below:





Michael S. Erhardt, CPA

Senior Vice President

Investment Strategist

Vining Sparks, IBG

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
This is a publication of Vining-Sparks IBG, L.P.
775 Ridge Lake Blvd., Memphis, TN 38120