Recommends FNMA 5s and especially Dwarf 4.5s over 5s/10s agency debentures. FNMA 5s benefit from the special roll (about 5/32s a month better than funding) and the potential for a decline in volatility after the recent spike. While the front month OAS on FNMA 5s are at tight level, they have little meaning, in the firm's view, as the two month rolls are through fail. When/if FNMA 5s appear rich two months forward, then analysts will take their basis trade off. Being short the basis in this environment may be very costly, as the basis resets cheaper for July. There are simply not enough 30-year 5s to go around.
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Notes A, B and C benefit from credit enhancement amounting to 33.3%, 16.2% and 7.0%, and the deal's capital structure will repay investors on a combined pro-rata and sequential basis.
May 7 -
Originators increased program offerings for the fifth consecutive month, but overall credit availability remains tight, the Mortgage Bankers Association said.
May 7 -
The top five issuers in the pool represent 4.73% of the pool, which is noticeably more diversified compared with the 12.50% concentration, according to Fitch's stressed portfolio at initial expected matrix point.
May 7 -
Rep. Andy Barr, R-Ky., is introducing a bill to establish an Office of Supervisory Appeals at each of the banking regulators that would give banks more power over the appeals process.
May 7 -
Price growth is decelerating but still driving historic home equity gains for owners and widening the gap between the haves and have-nots in housing, ICE finds.
May 6 -
Under the capital structure the senior notes will be repaid on a pro rata basis. Otherwise, the notes in the structure will benefit from excess spread and a senior-subordinate structure.
May 6