CMO Market Update

August 27, 2018

Trying something new this week. Below you will see structure highlights similar to bonds we saw trade to customers last week.

VADM spreads remain relatively wide, especially on an OAS basis (see below). Investors are considering these in conjunction with front/short cashflows. Recall, VADMs are constructed to limit extension risk. Notice the lack of cashflow volatility evidenced in the Weighted Avg. Life (WAL) below. In terms of finding cash, stronger secondary market bids, especially for shorter CMO structures, should continue to facilitate extension trades and other swaps.

Next week, we’ll have a summary of investor activity for August to review.

As always, I like to hear from my readers. It’s great when you guys let me know what you find helpful (or not) and if you want to see something custom offline.


Kevin A. Smith, CFA

Manager, Strategic Analytics

Vining-Sparks IBG LP

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