Market Musings

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The "Belly Breathing" Curve (2026-07-01)

Since COVID’s onset in 2020, the yield curve has embarked on an unprecedented volatility era, not just from a few large directional moves, but more significantly from the curve’s uncommonly fast year-to-year shape-shifting, and this year is no exception. With Fed rate policy restricting the front end and Fed holdings keeping the longer end (10yrs to 30yrs) technically contained, the belly of the curve has seen the highest rate volatility across the term structure, led by 2yrs and 3yrs. This persistent twisting, for now, favors defensive short duration floaters like GSE CRT, especially as the curve “belly breathes” higher... (Read more here)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Lazy Days of Summer (2026-06-01)

Summer 2026 is here and the GSE CRT market rolls into the season rather modestly as supply technicals and risk/reward metrics are still at, or even lower, than in the past, making for a possible “lazy days of summer” redux from 2025. From a “4 Cs of fixed income relative value” perspective (Credit, Convexity, Carry, Conditions), all continue to hover at the milder corner of the risk/reward matrix, so good old-fashioned, low-vol coupon clipping might be the highlight of the summer-again... (Read more here)

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The Curve Steeper, Credit Curve Compressed (2026-05-01)

April saw volatility retreat a bit and risk appetite returning as stocks and fixed income spread products rebounded while the Treasury curve bear-steepened to the highest levels of the year (the front end didn’t move much at all). In the midst of April’s shifts, the CRT complex saw a bit of a bull-steepener as A1 spread tightening progressively outpaced the rest of the CRT stack hierarchy. But overall yield levels across the sector remain in a rather compressed range, especially for post-COVID deal vintages... (Read more here)

 

 

 

 

 

 

 

 

 

 

 

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Sometimes the Best Offense is a Good Defense (2026-04-01)

The heightened risk and surging volatility immersing the markets right now is sending all sectors reeling. Despite the turmoil and a slower economy, Treasuries have sold off on inflation concerns, following stocks lower, and Treasury coupon yields are up 25 to 40+ bps MoM. At the same time, spread products widened significantly, providing a double whammy to broad-market fixed rates, particularly for extending MBS and longer duration IG. In the midst of the fray, GSE CRT’s short <2yr on average spread durations and decently steady floating coupons proved to be more resilient, showing that sometimes the best offense is a good defense... (Read more here)

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Modern Twist on the Capital Stack  (2026-03-02)

Recent-issue GSE CRT tranches have been printing with historically higher original CEs over the past several years, along with shorter optional redemption dates and commensurately higher gradings. If we look at the average CE at issuance across the capital stack, we see that the newer A1-designated class CEs have averaged in the 4%+ area since its inception (though the latest CAS deal comes in on the higher end of the spectrum), while M1s have seen a range between around 2.5% to 3.5%, with lows in 2020/2021. But M2s and lower down the stack show the largest relative new-issue CE increases, as well as the most contraction in average lives to optional redemption in recent years...With this modern twist on CEs, you could say that today’s M2s are the new M1½s, B1s are the new M2s, and B2s are the new B1s... (Read more here)

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