| Wednesday, February 14, 2024 |
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MANAGING DIRECTOR: |
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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 |
| 02/07/24 | 5.37 | 5.38 | 5.26 | 4.82 | 4.43 | 4.20 | 4.07 | 4.10 | 4.12 | 4.42 | 4.32 |
| 02/08/24 | 5.37 | 5.38 | 5.27 | 4.84 | 4.45 | 4.24 | 4.11 | 4.15 | 4.15 | 4.47 | 4.36 |
| 02/09/24 | 5.37 | 5.38 | 5.28 | 4.87 | 4.48 | 4.27 | 4.14 | 4.17 | 4.18 | 4.48 | 4.37 |
| 02/12/24 | 5.39 | 5.39 | 5.30 | 4.88 | 4.48 | 4.26 | 4.14 | 4.17 | 4.18 | 4.49 | 4.38 |
| 02/13/24 | 5.37 | 5.39 | 5.35 | 5.02 | 4.66 | 4.47 | 4.32 | 4.33 | 4.32 | 4.59 | 4.46 |
The data in the table above is static as of the time it was pulled, so rates may have changed. Treat all data in this table and PMR as indications only and availability is always subject to change. This information was pulled manually from sources we believe to be reliable. New source, as of 12/12/2022, Bloomberg, L.L.P. As of: close of business 02/13/2024.
US GOVT Mortgage-Backed Securities: An Attractive Opportunity
We noted in December the outlook for Mortgage-Backed Securities (MBS) looked positive for 2024. Even with a tight labor market and moderate wage growth, the larger CPI trend affords Fed optimism that inflation is on track to achieve its target. We believe this suggests we’re near the end of the tightening cycle and the market is pricing in as much as 150bps of rate cuts this year. Fixed income products, such as MBS, stand to benefit as the market becomes more confident of the Fed’s path. When uncertainty (volatility) is reduced, MBS spreads compress. And with mortgage rates near a 20yr high, new production (supply) is off. Yet as demand remains plentiful, pricing tracks stable to higher. It’s also generally believed that as rates fall, bank deposits rise and banks have historically been eager buyers of MBS. The chart below suggests that is already happening.
Source: Bloomberg, LP
While an inverted curve can be challenging for MBS, any normalization of the yield curve should force MBS spreads to tighten with an opportunity for capital gains. Fundamental and technical metrics, coupled with historically cheap valuations, coalesce for an opportunity in MBS to improve your portfolio income while taking very limited premium risk and targeted duration exposure.
Here are two pools with discounted dollar prices worthy of your attention.
While an inverted curve can be challenging for MBS, any normalization of the yield curve should force MBS spreads to tighten with an opportunity for capital gains. Fundamental and technical metrics, coupled with historically cheap valuations, coalesce for an opportunity in MBS to improve your portfolio income while taking very limited premium risk and targeted duration exposure.
Here are two pools with discounted dollar prices worthy of your attention.
- 15yr 5.0% @ 99-17 5.08% 5.36 WAL (Indication Only)
- 30yr 5.5% @ 98-28+ 5.69% 8.60 WAL (Indication Only)
15yr 5%
Source: Bloomberg, LP / Indication only, subject to change and availability without notice
30yr 5.5%
Source: Bloomberg, LP / Indication only, subject to change and availability without notice
Your CCB Capital Markets representative is happy to assist in evaluating if MBS are a good fit for your portfolio. Please let us know how we can help?
Your CCB Capital Markets representative is happy to assist in evaluating if MBS are a good fit for your portfolio. Please let us know how we can help?
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