Wednesday, January 31, 2018
MANAGING DIRECTOR: Scott Carrithers   PORTFOLIO SALES AND SERVICE: Steve Panknin • George Morris • Jeff Goble • Chris Thompson • Sean Doherty Kevin Doyle • Lonnie Harris •  Mark Tranckino • Robert Schuyler • Tom Toburen • Josh Kiefer  Nicole Burczyk • Kelley Frye • Natalie Regan • Aaron Stoffer • Chuck Honeywell

US Treasury Market
Date	1 mo	3 mo	6 mo	1 yr	2 yr	3 yr	5 yr	7 yr	10 yr	20 yr	30 yr
1/24/18	1.25	1.43	1.63	1.79	2.08	2.20	2.43	2.57	2.65	2.80	2.93
1/25/18	1.23	1.42	1.64	1.80	2.08	2.20	2.41	2.55	2.63	2.76	2.89
1/26/18	1.24	1.41	1.64	1.80	2.13	2.24	2.47	2.60	2.66	2.79	2.91
1/29/18	1.28	1.44	1.66	1.80	2.11	2.26	2.49	2.63	2.70	2.82	2.94
1/30/18	1.49	1.44	1.66	1.88	2.13	2.27	2.51	2.65	2.73	2.86	2.98

                                                                                      Source: U.S. Department of the Treasury, as of 1/30/18  

Reviewing Conditional Prepayment Rate

Yesterday we discussed how mortgage-bonds can have slower prepayments in a rising rate scenario and that can cause the duration of those pools to extend.  The measure of how quickly a pool is prepaying is its conditional prepayment rate (CPR).  This is the equivalent rate of the portion of principal that is paid each period.  CPR speeds on most mortgage pools move inversely with yield, so as prepayment speeds slow, the higher the anticipated return.  In the example below, the pool has a 1 month CPR of 4.0%, which indicates that in this period, 4% of the pools remaining principal will be paid off.  This pool has had a very consistent speed of prepayment, and a life CPR of 8.3. 

Source: Bloomberg, January 31, 2018

 

It is important to review historical prepayment speeds when evaluating seasoned pools.  As seasoned issues provide you additional details regarding performance overtime, many investors favor these pools due to the additional information regarding their behavior.  If you are looking for a bond with a consistent prepayment history, consider investing in the above bond.  It is currently offered at 101-9+ , yielding 2.59% with a WAL of 3.87.  Please contact your CCB representative for additional offering details. 

 

The details on the bond above represent an indication only, prices and availability are subject to change.

                                                                                                                                                                                                                                   

This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.

•Not FDIC Insured •No Bank Guarantee •May Lose Value