ARM Update

November 27, 2017

Yield spreads for new-issue hybrid ARMs to Treasuries remained stable for the week.  Activity in the ARM sector was resilient despite the holiday-shortened week.  Investors concentrated on adding new issue GN 3/1 2.00s.  These securities are trading at lower dollar prices because of the sell-off on the front-end of the yield curve.  During the past 90 days, yields are up approximately 50 bps for 2- to 3-year Treasuries.  Premium risk has been largely diminished with 3/1s trading close to par.

Traders were also active with odd-lot transactions.  There continues to be demand for odd-lot positions from CMO traders looking for collateral to structure new securities.  This is an opportunistic time to consider eliminating smaller line items that are subject to standard safekeeping and accounting fees that are more palatable for larger block sizes.


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