10 Year 3.5% FNMA Pool to Yield 3.00% to a 3.7 Year Average Life

As the 10 year Treasury continues to flirt with the magical 3% level, investors can take advantage of the higher yields in mortgage backed securities and have a shorter average life. The weakness in the longer end of the curve is resulting in very attractive yields for cash flow buyers in the intermediate part of the curve.

This FNMA pool has a 3% yield with an average life of 3.74 years with 1,286 loans. The weighted average loan size is only 134,000. Duration drift is also limited with less than 1 year increase in duration if rates move up 300 basis points.

FNMA3366

Coupon 3.50%

Maturity date 05/01/2028

Average life is 3.74 years

Duration is 3.4

Yield to average life is 3.00%

Dollar price is 101-17& 7/8ths

1,286 loans

Weighted average loan size is 134,000.00

Geographic’s

California – 12%

Texas – 8%

Illinois – 5%

Settlement date is 5/17

We own 3.4mm


Source: Bloomberg

Now you can take advantage of the higher yields in the market without going out 10 years to get a 3% yield. Take the 3% yield with a 3.7 year average life and lower your duration while receiving the monthly cash flow.