CMO Market Update

December 3, 2018



This week we will focus on the November Trade Summary where we look at what our Customers invested in last month.

Fixed-rate CMOs saw the most activity as usual but we did see a small resurgence in floating-rate demand. On November 8th, the 5-year Treasury hit a fresh 2018 high of 3.09 but it was all downhill from there as it closed out November at 2.84 where it still stands today.

For a couple months now (and for the first time in almost a decade), portfolio managers have been able to add 3.50+ yields in intermediate term mortgage investments. However, with Treasury yields declining and CMO spreads a bit tighter, a more current level for the grouping of fixed-rate CMOs purchased in November would be in the neighborhood of 3.35-3.40 today. Time will tell, but it will probably be harder to hit a 3.50 yield in December compared to the prior two months without extending duration or otherwise adding some other risk.



 



Kevin A. Smith, CFA

Director Investment Product Strategies

Vining Sparks IBG, LP

ksmith@viningsparks.com

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