ARM Update

September 5, 2017

Yield spreads for new-issue hybrid ARMs to Treasuries were unchanged on the week. Activity in the market was narrowly focused on post reset hybrid ARMs.  Investors concentrated on buying seasoned GNMA ARMs with a weighted average loan age of 60 to 100 months and coupons ranging from 2.25% to 2.625%.

There was also demand for GNMA 5/1 2.50’s.  These structures fell out of favor earlier in the year as prepayment activity became a concern.  However, after spreads widened 10 to 15 basis points, the lower dollar prices (~$101) have attracted buyers.

We continue to see relative value for new-issue hybrid ARMs to fixed-rate MBS.  Longer-reset structures (new issue 7/1s and 10/1s) compare favorably to 15-year MBS on an OAS basis.


Metrics for some commonly traded structures are below:


Michael S. Erhardt, CPA

Senior Vice President

Investment Strategist

Vining Sparks, IBG

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