Market Musings

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The Curve's Localized Volatility (08/31/23)

The curve continues to be persistently inverted with the Fed recently stating its inflation fight is not necessarily over. This keeps a steady/upward bias to the front end and, since the middle of last year, much of the curve volatility has been seen here. But now, short rates have largely stalled out waiting for the next Fed move, while the belly/long end of the curve has taken on a little more volatility. 2-10yr Treasury yields are +20-40bps higher YTD, negatively affecting major rates and corporate segments. Meanwhile, shorter durations are carrying much better with relatively less volatility at this juncture.

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A Decade Of Benchmark GSE CRT (07/31/23)​

The first benchmark GSE CRT deal in history, Freddie Mac’s STACR 2013-DN1, just matured this month, marking the 10-year anniversary of the GSE CRT market. The 2nd sector deal ever issued, Fannie Mae’s CAS 2013-C01 is slated to mature in October, and after a decade, the market has evolved into a staple asset in mortgage credit securitization. Since inception in 2013, there have been 136 deals, totaling over $131B in lifetime issuance, referencing nearly $4.6T in loans. Based on the CRTx® Aggregate Index, if you had invested in the first 2013 deals, and stayed reinvested in the market to now, your total return would be 83.2%, or a simple annualized rate of 6.24%. Not bad versus rates and credit in the age of lower-to-higher rates.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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