CMO Market Update

May 6, 2019

CMO spreads to Treasurys were unchanged last week. For the week ending April 26th, a 2-3 basis point widening undid two consecutive weeks of modest tightening, leaving yields on 3, 5, and 10yr PACs and Sequentials effectively unchanged from the beginning of April to now.

This week, we look at the April Trade Summary.

April Trade Summary

Yield Book analytics on CMO trades have been steady since February. Unfortunately, that means 3% yields can be difficult to achieve. Effective Durations and Weighted Average Lives have stuck around 2.5 and 3.5, respectively, which tends to be a sweet spot for many of our Customers. In terms of bond characteristics, Customers invested in a wider variety of class types this month. March was dominated by Sequentials, while PAC-1s accounted for nearly a quarter of activity. April saw a more even distribution.

Travis Nauert, CFA

Analyst, Investment Strategies

Vining Sparks IBG, LP

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