CMO Market Update

June 28, 2021

Last week, we saw intermediate and longer maturity Treasury yields increase, while the shorter end of the curve was basically unchanged. Nominal CMO spreads widened two basis points, clawing back some of the tightening seen this month. For the maturities and structures we monitor, CMO spreads are marginally wider year-to-date, but largely in line with where they started 2021.

Once again, investors were busy in the CMO space last week. Activity was somewhat muted on Monday and Tuesday, but ramped up as the week progressed. Cut coupons are still in focus, but there was a higher concentration of trades involving 1.25% – 1.50% coupons, as opposed to the 1.00% cuts that have been dominating activity. In terms of collateral, G2SF 3.0 remains in high demand, as well as FGLMC 2.5. These two collateral types accounted for the overwhelming majority of trades in terms of par amount.

Monthly pricing has been updated on our client access portal (as of 6/23/21), giving portfolio managers an opportunity to view updated analytics and gain/loss projections. If you do not have access but would like to register, please click here.

For more context on yields, spreads, and analytics, please see the Treasury and CMO sections from week’s Investment Alternatives Matrix below.

In our next CMO sector update, we will review activity in June with the monthly trade summary.

Travis Nauert, CFA

Analyst, Investment Strategies

Vining Sparks IBG, LP

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