CMO Market Update
April 8, 2019
CMO spreads to Treasurys were unchanged for the second consecutive week. Now, we take a look at the March Trade Summary.
March Trade Summary
Generally speaking, CMO trades in March, and Yield Book analytics on bonds traded, were reminiscent of activity late last year. The notable exception: projected yields are down and 3% yields are more difficult to earn.
- Customers invested in fixed-rate coupons
- Duration extended from 2.3 to 2.8, reversing shortening trend of last 4 months
- Yields on fixed-rate purchases increased modestly from 2.88 to 2.90
- Sequentials dominated activity, accounting for 75% of CMO trades
- VADMs failed to sustain interest seen in January and February
- Again, customers mindful of risks from falling rates
- PAC-1 activity decreased but remains meaningful
Travis Nauert, CFA
Analyst, Investment Strategies
Vining Sparks IBG, LP