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Understanding the Yield Table

by Natalie Regan

Most MBS buyers are familiar with the Bloomberg Yield Table (YT) screen.  It is a thoughtfully curated and very functional screen when examining a mortgage pool.  The information is plentiful and could appear overwhelming at first glance – but after becoming familiar with each section, the yield table is very handy and can give the investor all the information necessary to know if the investment is a good fit for an individual portfolio.

A breakdown of the components of the yield table is shown below.  Collateral detail related to loan size and geographic concentration is included. Month by month historical speeds are also shown to help the investor in projecting assumptions on future performance.  Treasury yields and spreads in each rate scenario are among a few fields included on this one-page table.  Understanding the Yield Table will help each investor of MBS pools to feel more confident in understanding the collateral detail and past/future performance on the individual structure.

Bank bond portfolios are typically significant holders of MBS pools, so keeping a few of these characteristics top of mind at time of purchase when planning for different rate environments is a prudent thing to do.

When investors see MBS pools offered – if not initially given a picture of Bloomberg YT or an offering flyer that includes all of these details, ask for one and consider the following:
  • How does the pool as it is offered perform in a -100/-300 environment? Yield AND Average Life (Middle of the chart, blue box Scenario Analysis)
  • Is this a seasoned pool? (#10, #14) And how many months remain to maturity? (#13)
  • Will my prepayment risk be protected or exposed by any factors? 
o    Loan count (#18)
o    Max Loan Size (#17)
o    Geographic Diversification (#16)
o    Borrower Mortgage Rate (#11)

We believe this remains a great sector to find value for a bank’s portfolio, especially when rates are high. Use all the information available to pick the best pool for your portfolio mix both now and a year or two from now.

Please reach out to your CCB representative to discuss further.
 
 

 


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