CMO Market Update

February 18, 2020

CMO spreads to Treasury yields were unchanged last week and have tightened 5 to 8 basis points year-to-date. Spreads for 3, 5, and 10-year PACs and Sequentials remain at their respective 1-year averages. View the graphs below for 3-year bonds, where our customers typically invest in this sector (see monthly Trade Summary for additional trends).

Considering 3 years of history, however, suggests there is additional value in this space. Despite some tightening to start the year, spreads are still +1 Standard Deviation above their respective 3-year averages.

Don’t forget about our Investment Alternatives Matrix, typically released the second business day of the week, to get a sense of the market and how different sectors are projected to perform.

For additional mortgage related content, please click here to view our February MBS Prepay Commentary.

Travis Nauert, CFA

Analyst, Investment Strategies

Vining Sparks IBG, LP

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