CMO Market Update

September 27, 2021

Between volatile equity market sessions and a Fed rate decision, last week gave investors plenty to digest. While no changes were made to the Fed’s policy, there was warning that “moderation in the pace of asset purchases may soon be warranted”. The week ended with US equities modestly higher and Treasury yields also higher. Spreads to Treasury yields for Agency CMOs, along with MBS, saw some slight widening week over week.

Investor focus remains on low-coupon cuts in the CMO space. Activity last week centered on 1.25% – 1.50% cuts, primarily off jumbo collateral. After a couple decent weeks in a row for floating-rate bonds, there was very little activity to speak of last week.

Tomorrow, market pricing and analytics as of September 23 will be updated on our Client Access portal. For those that work with the bond portfolio, this will give you a glimpse into what quarter-end pricing will look like for Q3. Over the weekend, we will provide another update (pricing only) as of September 30.

Below are the Treasury and CMO sections from last week’s Investment Alternatives Matrix. Please note the changes in Treasury yields from Tuesday (below) to now. As of this writing, the 3-year Treasury is yielding 0.551%, the 5-year is yielding 0.978%, and the 10-year is yielding 1.484%.

Travis Nauert, CFA

Analyst, Investment Strategies

Vining Sparks IBG, LP

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