CMO Market Update

November 25, 2019

CMOs got a brief mention in a WSJ article from earlier this month. The piece discussed how some pension fund managers are looking to “unusual investment territory” in search of return in this low-rate environment. One example is Nest, a £8.5 billion ($10.9 billion) workplace-pension fund manager backed by the U.K. government. The article states, “the firm is financing infrastructure projects such as toll roads and airports, and lending to commercial real-estate projects and buying collateralized mortgage-backed securities”.

Spread Talk

Spreads to Treasury yields were unchanged last week for fixed-rate CMOs and remain below but near their highs for 2019.

November Trade Summary on the Horizon

Next week, we will examine the Monthly Trade Summary for November. A reminder that we observed increased VADM activity during September and October. It stands to reason that some investors may be positioning themselves for rates to pop back up after the declines we’ve see in 2019. Having said that, the prevailing market sentiment favors a lower rate environment, with the Fed cutting 25bps each at meetings held in mid September and late October.

Travis Nauert, CFA

Analyst, Investment Strategies

Vining Sparks IBG, LP

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