The firm recommends selling 30-year 5.5s and buying a duration-weighted amount of 5.0s. The rally in bonds has quickly pushed 30-year 5.5s to a point where prepayments are expected to rise substantially in the months ahead; this will serve to limit further price upside on 5.5s. 5.0s should also benefit from a flatter yield curve, as investors typically react to curve flattening by buying the lowest available 30-year coupon. In addition, we expect 5.0s to benefit from enhanced liquidity, as issuance and CMO activity in the coupon increase over time, laying the foundation for persistent specials in the TBA roll market.
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Spreads ranging from 16-18 basis points over the three-month, interpolated yield curve on the P1 (Moody's) and F1+ (Fitch) notes, to 160 to 170 over the benchmark on the class D notes.
April 25 -
Mortgage rates rose 7 basis points this week, Freddie Mac said, and more increases are likely following a weaker than expected gross domestic product report.
April 25 -
Broken down by product type, the agency's NJCLASS Standard Fixed product should account for a large majority of the loans, 75.4%. NJCLASS Consolidation will account for the next-largest group, 14.1%.
April 24 -
Congressional Review Act resolutions are ramping up ahead of the 2024 election cycle. Experts say that, although none are likely to become law, the resolutions are still powerful messaging and political tools.
April 24 -
The notes will price against Treasurys, with spreads expected to fall between 85 and 90 basis points over the benchmark.
April 24 -
The JPMorgan Chase CEO took aim Tuesday at the proposed Basel III endgame rules, hindrances to mergers and bureaucratic burdens. "I would love to have a more productive relationship with regulators, but I think it takes conversation," Dimon said.
April 24