CMO Market Update

January 31, 2022


Treasury yields rose across the curve last week, and once again it was short to intermediate maturities that saw the biggest increases. The 1- and 2-year yields rose 20 and 19 basis points, respectively. With this sharp increase on the front end of the curve, we have seen nominal CMO spreads tighten. Still, projected yields in this space look the most attractive we have seen since before the pandemic.


In terms of activity last week, 2.00% coupons were in high demand, although investors looked to a variety of collateral types. 2.00% cuts off FNCL 2.0, 2.5, and 3.5 collateral traded, including some 100% investor property. Additionally, some 1.0% cuts off seasoned, higher coupon (5.0% on average) traded as well.


As mentioned in last week’s update, projected yields are trending towards 2.00% for bonds with a 4-year average life. This is where our customers that are active in the CMO space typically traffic. It will be interesting to see what the metrics look like on next week’s trade summary for January given the move in yields we’ve seen to start 2022. For more analytical context on this sector, the Treasury and CMO sections from last week’s Investment Alternatives Matrix are below.



January Pricing

Pricing and analytics for customer portfolios are updated on our Client Access portal, with pricing as of January 24. If you do not have access, but would like to register, please click here.



Travis Nauert, CFA

Analyst, Investment Strategies

Vining Sparks

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