CMO Market Update

August 20, 2018

VADM (Very Accurately Defined Maturity) spreads remain relatively wide and are a great addition or alternative for investors already considering front/short cashflows with WALs between 3-5 years. VADM investors typically want to mitigate cashflow extension and a VADM structure is designed exactly for this need.

Even with the relative value shift in VADM structures, front sequential tranches, full coupons and also cuts with coupons .5% below the underlying collateral maintained the greatest investor focus.

In terms of finding cash, stronger secondary market bids, especially for shorter CMO structures, should continue to facilitate extension trades and other swaps.

Kevin A. Smith, CFA

Manager, Strategic Analytics

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