CMO Market Update

April 22, 2019



CMO spreads to Treasurys tightened one basis point for the second consecutive week. For 5 and 10 year Agency Sequentials and PACs, spreads have backed off recent highs but remain within a basis point or two of those levels reached in late March.

As the Yield and Spread Snapshot from the overall commentary exhibits, CMOs stand out compared to other sectors when looking at Year-to-Date movements. All other sectors have experienced a tightening of spreads, most notably longer Agency callables, while CMO spreads have widened 6-12 basis points depending on class and maturity. All else equal, these relationships imply improved relative value for the sector as pickup over Treasurys has increased.

Activity last week was largerly a repeat of the week prior: demand for 4 off of 4s front Sequentials, in addition to coupon cuts, and VADMs.



When Sector Updates resume May 6th, we’ll examine the Monthly Trade Summary for April.



Travis Nauert, CFA

Analyst, Investment Strategies

Vining Sparks IBG, LP

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