Wednesday, January 16, 2019 |
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| 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 • Gus Koppen |
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US Treasury Market |
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| Date | 1 mo | 3 mo | 6 mo | 1 yr | 2 yr | 3 yr | 5 yr | 7 yr | 10 yr | 20 yr | 30 yr |
| 01/09/19 | 2.40 | 2.45 | 2.52 | 2.59 | 2.56 | 2.54 | 2.57 | 2.64 | 2.74 | 2.90 | 3.03 |
| 01/10/19 | 2.42 | 2.43 | 2.51 | 2.59 | 2.56 | 2.54 | 2.56 | 2.63 | 2.74 | 2.92 | 3.06 |
| 01/11/19 | 2.41 | 2.43 | 2.50 | 2.58 | 2.55 | 2.51 | 2.52 | 2.60 | 2.71 | 2.90 | 3.04 |
| 01/14/19 | 2.42 | 2.45 | 2.52 | 2.57 | 2.53 | 2.51 | 2.53 | 2.60 | 2.71 | 2.91 | 3.06 |
| 01/15/19 | 2.41 | 2.45 | 2.52 | 2.57 | 2.53 | 2.51 | 2.53 | 2.61 | 2.72 | 2.92 | 3.08 |
Source: U.S. Department of the Treasury, as of 01/15/2019
CMO: Low Extension
Collateralized Mortgage Obligations, (CMO’s), were created to refine principal payments on mortgage-backed securities.
The ‘sequential’ was the first CMO structure produced. This structure exists for investors that prefer principal payments in short, intermediate or long term cash flows. Cash flow portions were given the name “tranche”, a French word for slice, or portion. The first tranche has the shortest weighted-average life, (WAL), with the lowest extension risk. Medium and long term tranches do not receive pre-payments until previous tranches are paid out.
An attractive CMO is FHR 4368 HB, a Freddie Mac seasoned sequential tranche of 20 year loans from 2014. As part of the first group of pre-payments it has a final maturity of 2032. The base case WAL is 2.21 years and the extension is low with the WAL projected to 2.61 years in the +300 bp scenario. In addition the base case yield is 2.921% at +40 bp to the curve.
The yield table and projected cash flow tables are below.
Yield Table
Source: Bloomberg 01/16/19
Cash Flow Table
Source: Bloomberg 01/16/19
Please contact your portfolio representative for details on the current market availability and questions on CMO’s.
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