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Tuesday, October 30, 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 • Gus Koppen

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
10/23/18 2.21 2.33 2.48 2.67 2.89 2.95 3.01 3.10 3.17 3.29 3.37
10/24/18 2.20 2.34 2.47 2.64 2.84 2.89 2.94 3.02 3.10 3.24 3.33
10/25/18 2.19 2.34 2.47 2.66 2.86 2.92 2.98 3.07 3.14 3.27 3.35
10/26/18 2.16 2.33 2.47 2.63 2.81 2.85 2.91 3.00 3.08 3.23 3.32
10/29/18 2.17 2.34 2.49 2.64 2.81 2.86 2.91 3.00 3.08 3.23 3.33
                                                                                                                                       Source: U.S. Department of the Treasury, as of 10/29/2018
 
                                                 Protection From Extension - VADMs
 
Mortgage-backed securities (MBS) continue to be a recommended sector and an attractive CMO, the VADM (Very Accurately Defined Maturity) structure is recommended.  The VADM structure is not well known but its design is likely to reduce extension risk. Currently, the spot light is on extension risk for MBS in the rising interest rate environment. The VADM structure protects extension risk with 0% PSA at the lower end of the collar of a CMOs principal payments.   The low collar is the key to the extension risk.  

A current recommendation on a VADM is FNR 2018-44 PV, tranches are AD (accretion directed) and PAC (planned amortization class).
 
Highlights:
  • Y I E L D – Base case yield 3.481%, +50 bps to the curve
  • Low Extension – Base case WAL 6.00 // WAL 6.77 at +300 bps // 6.78 at 0% PSA  
  • Consistent Yield – Yield in the 3.40%’s in the +/- 300 bps range
  • Unique MBS/CMO offer at $100.00
Yield tables are below.
                                                                                                                  Source: Bloomberg as of 10/29/2018 at 11:37am (For informational purposes only/Subject to change)
Historical Yield Table
                                                                                                                     Source: Bloomberg as of 10/29/2018 at 11:38am (For informational purposes only/Subject to change)

For MBS/CMO current offers and questions on VADMs please contact your CCB Capital Markets Group Investment Officer.





 


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