Pass-Throughs Slip a Bit As Fed Meeting Looms
May 02, 2011
Traders also noted the absence of any pertinent economic data which could cause Treasurys or pass-throughs to break out of their trading ranges. A New York trader said 30-year mortgage-to-Treasury yield spreads were virtually unchanged to 0.01 percentage point tighter. The yield spread is the difference in the yield of a given debt instrument and that of a similar-term Treasury issue, with a tightening of the spread suggesting an decreased perception of risk. In the intermediate-term mortgage market, the day's sole highlight was an early morning block trade of $150 million in Federal National Mortgage Association seven-year 7 1/2s, which are purported to be used as collateral for an upcoming collateralized mortgage obligation, or CMO. Collateralized mortgage obligations (CMOs) are mortgage-backed securities that have been sliced into parts to offer different yields and different levels of risk. A pass-through is a security made up of a pool of debt instruments, with the income from the debt passed through an intermediary -- usually a government agency or investment bank -- to the investors.
