CMO Market Update

July 8, 2019

CMO spreads to Treasurys are unchanged over the last two weeks.

June Trade Summary

The belly of the Treasury curve fell 50 basis points during Q2 and although CMO yields held up well to begin the quarter, they finally gave way in the last half of the period. Whereas customers invested in bonds with projected yields around 2.90% to begin the year, they are now slated to earn under 2.50% on purchases today for bonds with a similar duration and average life profile. For CMOs purchased in June, we saw more activity in PAC-1s than recent months. Historically, we have observed PAC-1 spreads as 5-10 basis points lower than spreads on Sequentials.

Travis Nauert, CFA

Analyst, Investment Strategies

Vining Sparks IBG, LP

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