CMO Market Update

April 1, 2019

In the month of March, CMO spreads to Treasurys widened for three consecutive weeks, but were unchanged last week to close out the month and quarter. As alluded to in the overall commentary, spreads for the sector are now 10-20bps wider to start the year. The entirety of this movement occurred in February and March. Spreads were steady in January.

Comparing yields and spreads on CMOs appears to tell two different stories. On the one hand, yields have retreated from recent highs and are trending towards the lower end of their ranges from 2018 to present. Conversely, spreads are at their widest levels over the same period, suggesting relative value is available, especially in the 5-10 year space where 3% yields are still attainable.

Next week, we will examine the Monthly Trade Summary with analytics on CMOs in which customers invested during March.

Travis Nauert, CFA

Analyst, Investment Strategies

Vining Sparks IBG, LP

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