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

The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Copyright © 2021
This is a publication of Vining-Sparks IBG, L.P.
775 Ridge Lake Blvd., Memphis, TN 38120