Tuesday, April 7, 2020 |
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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 • 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 |
| 03/31/20 | 0.05 | 0.11 | 0.15 | 0.17 | 0.23 | 0.29 | 0.37 | 0.55 | 0.70 | 1.15 | 1.35 |
| 04/01/20 | 0.03 | 0.09 | 0.14 | 0.16 | 0.23 | 0.28 | 0.37 | 0.51 | 0.62 | 1.04 | 1.26 |
| 04/02/20 | 0.09 | 0.09 | 0.15 | 0.14 | 0.23 | 0.29 | 0.39 | 0.53 | 0.63 | 1.04 | 1.26 |
| 04/03/20 | 0.09 | .010 | 0.15 | 0.15 | 0.23 | 0.30 | 0.39 | 0.52 | 0.52 | 1.05 | 1.05 |
| 04/06/20 | 0.09 | 0.15 | 0.17 | 0.20 | 0.27 | 0.35 | 0.44 | 0.58 | 0.67 | 1.08 | 1.27 |
Mortgage Refi Wave
With the dramatic drop in interest rates, investment managers should be keenly aware of prepayment risks for premium pools. The MBA refi index saw a dramatic pickup in refis in March as rates crashed lower and homeowners rushed to refi at all-time lows.
We recommend all accounts run a heat map of MBS holdings and specifically focus on higher WAC pools (30yr pools > 4% WAC / 15yr pools >3.5% WAC) to identify and possibly look to sell higher coupon pools. With TBA bids remaining strong now could be a good time to lock in gains and exit pools that could potentially ramp to much higher CPRs (and lower yields).
We recommend all accounts run a heat map of MBS holdings and specifically focus on higher WAC pools (30yr pools > 4% WAC / 15yr pools >3.5% WAC) to identify and possibly look to sell higher coupon pools. With TBA bids remaining strong now could be a good time to lock in gains and exit pools that could potentially ramp to much higher CPRs (and lower yields).
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