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

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