Neutral between 5s and 5.5s (they offer just about equal hedge adjusted carry) with 5s likely to perform better if yield lows are retested. 5.5s are a better long with a more bearish market outlook. Other relative value trades Greenwich still favors include being long Dwarf 4.5s or FNMA 20-year 5s vs. FNMA 5.5s, although both of these issues may require an offsetting curve hedge to protect against further underperformance if the yield curve returns to a flattening bias. GNMAs felt some selling pressure Tuesday, remains overvalued. GNMA II 5s are probably worth a stab vs. Is if CMO activity picks up.
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