Pass-Throughs Move Higher As ARMs Dominate Trading
May 19, 2011
Thirty-year current coupon pass-throughs rose 9/32, only a little behind the gains in the Treasury market. But traders reported that there was little action in the mortgage market despite the release of August employment figures. The big exception was adjustable-rate mortgages, where traders saw investor buying and what they believed was accumulation of collateral for swap trusts. Adjustable-rate mortgages feature periodic adjustments in the interest rate -- usually every six months. ARMs appeal to lenders because they pass along some of the interest-rate risk and to buyers because they offer the possibility of lower rates. Traders said the payroll data, released at 8:30 a.m., caused about half an hour of activity. In contrast to the 30-year sector, the ARMs market was much busier. Once people decided the employment numbers were not as shocking as they first thought, they started buying ARMs, particularly conventionals, one trader said. ARMs traders said $130 million to $140 million of Ginnie Mae 6 1/2s were bought Thursday for what may be a swap trust. A purchase of $75 million of Ginnie Mae 6s Friday may also be going the same way, they said In addition, Freddie Mac announced a $725 million strip trust backed by 8% 30-year pass-throughs. The offering is being underwritten by a team of 11 firms.
VastPress 2011 Vastopolis
