CMO Market Update

April 5, 2021



March Trade Summary

March was a very active month in the CMO space as depository institutions have ample amounts of cash on hand and rising yields brought buyers into the market. Rising rates were reflected in the average projected yield purchased by customers last month, jumping from 1.10% in February to 1.21% in March. As discussed in recent CMO updates, investors have been extending out on the curve for additional spread pickup, and that was the case again this month. The average WAL purchased for a fixed-rate agency CMO was nearly 5 years, a notable increase over last month. But this aligns with weekly activity observed and feedback received from customers. We have highlighted previously this area of the curve when referencing the weekly Investment Alternatives Matrix (See CMO section below), as customers continue to favor cut coupons (1.00% – 1.50%) and avoid premiums over 102-103.



Another point of interest from the analytics: floating-rate purchases were down month-over-month. Although last month was a high watermark for floating-rate purchases, this was perhaps a steeper drop off than expected. This could be more of a supply issue than anything else.


And lastly, there was some VADM activity for the first time in a couple months. While marginal, perhaps managing extension risk is on investors’ minds with the 10-year Treasury holding it’s current level of 1.70%. For the rest of the metrics, please see the table below.




Travis Nauert, CFA

Analyst, Investment Strategies

Vining Sparks IBG, LP

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