CMO Market Update

November 29, 2021

The holiday-shortened week led to lighter activity in the CMO space. Treasury yields declined to end the week as a flight to quality occurred due to reports of the new Omicron variant. The market is weighing the potential impact on the economy, but Treasurys are selling off this morning reversing some of last Friday’s move.

CMO spreads widened 3 basis points week-over-week with the drop in benchmark yields. For the structures we monitor, this brings spreads off their lows of the year. As discussed last week, despite spreads being at the bottom end of their range, yields are as high as they’ve been in the last 18 months in this sector.

Overall, investing trends remain constant. Customers continue to favor cut-coupon CMOs, primarily PACs. In next week’s update, we will review November activity with the monthly trade summary. It will be interesting to see how projected analytics on new purchases compare month-over-month with yields trending up.

Market pricing and analytics have been updated as of 11/22/21 on our Client Access portal. If you do not have access, please click here to register.

Travis Nauert, CFA

Analyst, Investment Strategies

Vining Sparks

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