CMO Market Update
February 19, 2019
Spreads to Treasury yields for Agency PACs and Sequentials have widened 4-8bps over the last two weeks. They had been mostly unchanged to start the year. When compared to all product types we monitor, CMOs were the only sector in which spreads widened last week.
Although yields in the 5 and 10 year space are between their highs and lows since the start of 2018, spreads are at their widest over the same time period. So, while many of our investors invest in 5 year paper anyway, they are also earning attractive yield pickup over benchmark government bonds.
As the chart below exhibits, spreads for 3 year SEQs and PACs remain in the middle of their ranges from 2018 to present; however, longer maturities are at the top end of their ranges.
Travis Nauert, CFA
Analyst, Investment Strategies
Vining Sparks IBG, LP