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

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