The CRTx® Aggregate Index returned +0.82% in November as spreads ended a little firmer for the month. CRT underperformed versus rates and IG/HY as the curve rallied modestly, providing a boost to longer duration fixed rates. With one month to go in 2024, GSE CRT is now up 10.48% YTD, well outpacing broader bond sectors, and within earshot of surpassing 2017’s 10.60% for the 2nd-highest total return year in CRT history behind 2023’s record 17.69%.

The CRTx® Aggregate Index gained +0.70% in October, just short of carry, as market value changes across the CRT complex were lightly mixed MoM. CRT outperformed versus broader rates and IG/HY sectors which got dented by a wholesale selloff in the belly/long end of the curve. With the latest STACR tender offer premiums giving a little positive nudge to October returns, the GSE CRT sector is now up 9.59% YTD with two months left to go in the year.

The CRTx® Aggregate Index returned +0.73% in September, essentially at carry, but things were mixed across the CRT complex as the latest STACR tender premiums helped offset some market value erosion. CRT underperformed vs. rates and IG/HY for both the month and the quarter as continued curve rallying buoyed fixed rate returns in Q3. On the other hand, GSE CRT is still ahead YTD, now up 8.82% heading into Q4, but broader fixed income has certainly cut into the lead.

The CRTx® Aggregate Index managed a below-carry +0.38% return for August as sector market values gave some ground MoM. Broader rates and IG/HY outperformed vs. CRT, boosted by further rallying in belly/long-end-of-the-curve and a modest firming in corporate spreads. While broader fixed income has had a strong Q3 so far, benchmark GSE CRT is still outpacing in the YTD standings, now up 8.03% for 2024 based on the CRTx® AGG’s performance.

The CRTx® Aggregate Index posted a +0.90% gain for July as total returns across the CRT complex modestly varied. The belly/long end if the curve fell again MoM due to a little more dovish Fed, causing broader rates and IG/HY to outperform vs. CRT. While fixed rates got the edge for a second month in a row, CRT floaters overall are now up 7.60% YTD based on the CRTx® AGG, still outpacing the major fixed rate aggregates with 5 months to go in the year.

The CRTx® Aggregate Index returned a just-below-carry +0.67% in June as various parts of the GSE CRT complex saw spreads edge out. With the belly/long end if the curve rallying again MoM, broader rates and IG/HY outperformed vs. CRT as duration won the June battle, but CRT floaters are still winning the 2024 return “campaign” as the CRTx® Aggregate closed Q2 gaining 2.72% and is now up 6.64% for the year.

The CRTx® Aggregate Index posted a +1.14% return in May as the CRT credit curve bull-flattened and market value gains were seen almost unanimously across the complex. While GSE CRT carry remained robust and the latest STACR tender premiums marginally boosted sector returns in May, CRT underperformed vs. broader rates and IG/HY as Treasury yields reversed some of April’s curve selloff and duration fared better for the month. For 2024 the CRTx® Aggregate is now up 5.94%.

Troubled regional lender New York Community Bancorp (NYCB) is trying to show investors that it is getting a better handle on the risks embedded in its massive loan book.

One option: Shift some of those risks to private equity firms or Wall Street money managers.

The CRTx® Aggregate Index turned in a +0.89% return for April, bringing the Index’s winning run to over a year. Market value changes across the complex were modestly mixed, but some MoM spread firming down the capital structure and the latest CAS tender premiums helped the Index return slightly in excess of still-substantial carry as broader rates and IG/HY sectors got buffeted by April’s curve selloff. YTD, the CRTx® Aggregate is now up 4.74%.

The CRTx® Aggregate Index posted a +1.20% return for March, bringing the Index’s string of positive monthly returns to twelve. Incrementally tighter spreads and the latest STACR tender premiums helped keep CRT returns for the month in context with broader fixed income spread products, which benefitted from some rallying in the belly/long end of the curve and progressively firming spreads down the credit spectrum. For Q1, the CRTx® Aggregate finished up 3.81%.

The CRTx® Aggregate Index managed a below-carry +0.50% return for February in spite of net wider spreads for the month, making it the Index’s 11th straight positive month in a row. CRT outperformed broader fixed income as coupon Treasury yields surged higher, putting most major fixed rate sectors in negative territory for February, even in the midst of some corporate spread tightening.

Information Management Network (IMN) 2024 MBS Forum Advisory Board guides the content production, including speaker acquisition, and ensures a cutting edge, timely, and educational program for all attendees.

The latest 2024-02-01 SCI/MF&Co SRTx™ (Significant Risk Transfer Index) fixings have been released.

Conference Panel: Mortgage Risk Transfer: CRT's Relative Value Landscape / Understanding GSE Dynamics in a Shifting Landscape: Strategies to enhance CRT appeal, the growing importance of re-insurers, S&P's criteria changes for insurance companies and impact on MILN market, identifying relative value in CRT, and analyzing market dynamics for opportunities and pitfalls.

The CRTx® Aggregate Index gained 2.08% in January, a positive start to 2024 and the 10th straight up-month in a row as tighter spreads and steady coupons drove total returns. CRT outperformed broader fixed income as benchmark Treasury yields moved higher, dragging fixed rates down in January.

The CRTx® Aggregate Index posted a +1.43% return in December, the 9th straight positive month in a row as markets rallied into year-end. CRT’s substantial coupon carry, tender premiums, and a virtually year-long spread tightening trend helped the CRTx® Aggregate Index finish Q4 at +3.45%, and 2023 at a record +17.69% annual total return, eclipsing the previous record of +10.60% back in 2017.

The CRTx® Aggregate Index turned in a +1.50% return for November, rallying in kind with the risk-on moves in equities and fixed income. CRT underperformed broader markets for the month though, as the belly/long end of the curve rallied significantly off October highs, causing duration to win the month. CRT credit curve bull-flattening and the latest STACR tender combined for complex-wide positive returns. The Index YTD is up 16.02% with one month to go in 2023, still tracking at a record annual return pace.

The CRTx® Aggregate Index eked out a +0.49% return in October, the 7th straight positive month in a row. Curve “bear un-inverting”, volatility, and broad-based spread widening roiled markets, and GSE CRT returned below carry. The sector on whole still outperformed rates and IG/HY, buoyed by substantial coupon carry and the latest CAS tender premiums. The Index has now returned 14.31% for 2023 YTD, still tracking at a record annual total return pace.

The CRTx® Aggregate Index returned +1.10% for September, the sixth straight positive month in a row. Overall spread firming, substantial carry, tight supply technicals, and a lift from STACR tender premiums helped GSE CRT outperform broader fixed income sectors as a higher, flatter curve battered rates and corporate credit. The Index finished Q3 up +4.19% and has returned 13.76% for the year so far, the highest YTD return through Q3 in Index history.

The CRTx® Aggregate index posted a +0.70% total return for August, less than carry, but made for a 5th positive monthly gain in a row. Despite a softening in recent-issue spreads, CRT edged out broader markets as net-higher rates in the belly and long end of the Treasury curve dented rates and corporates, while equities were on a downtrend throughout the month. The sector is still outperforming rates and IG/HY, with the CRTx® AGG so far gaining 3.06% QTD and 12.52% YTD.

Mark Fontanilla & Co., LLC (MF & Co) announced today the launch of its advanced index analytics digital platform, the CRTx® Index Portal, for the company’s flagship CRTx® (Credit Risk Transfer Return Tracking Index) Index Suite. With this new portal, the company is also adding index variations to its comprehensive CRTx® bond index family, in addition to introducing a flat fee structure for benchmark index licensing.

The CRTx® Aggregate index posted a 2.34% total return in July, the 4th straight winning month in a row. A bull flattening credit curve, on top of substantial floater carry, continued to buoy GSE CRT returns for the month amid rallying equities and mixed performance across the broader fixed income market. YTD, the sector is outperforming rates and IG/HY, with the CRTx® AGG gaining 11.73% so far, as the GSE CRT market reaches its 10-year anniversary.

The CRTx® Aggregate index posted a 3rd straight month of gains, returning 1.65% in June. With the Fed pausing rate hikes, but the belly of the curve rising/inverting more, credit curves bull-flattened and CRT outperformed rates and IG, while performing in context with HY. For Q2, the CRTx® AGG finished up 5.16% on substantial carry, tenders, and supportive supply technicals.

For the 2nd month in a row, the CRTx® Aggregate index finished in positive territory, posting a 1.33% total return for May. Amidst debt ceiling volatility and higher rates, CRT spreads largely firmed MoM and the sector outperformed most broad stock and fixed rate bond segments which saw red in May, save for tech. YTD, the CRTx® AGG is now up 7.42% as substantial carry, tenders, supportive supply technicals, and favorable mortgage credit still buoys the sector.

The CRTx® Aggregate index gained 2.11% in April, rebounding from last month’s bank-stress induced decline. GSE CRT rallied in kind with the overall moves in equity and fixed income markets as medium/long term Treasury yields fell and overall credit spreads firmed. YTD, the CRTx® AGG is up 6.01%, outperforming broader rates and IG/HY benchmarks on the back of higher coupon carry and supportive supply technicals.

Information Management Network (IMN) 2023 Annual Investors' Conference On Risk Transfer advisory board guides the content production, including speaker acquisition, and ensures a cutting edge, timely, and educational program for all attendees.

The CRTx® Aggregate lost ground in March, posting a -0.17% monthly total return amidst the prevailing bank-related market stress. Broader equity and fixed income markets saw wide trend swings and heightened volatility throughout the month, but the curve eventually “deflated” back down towards January levels, and stocks and fixed rates net rallied for March after a mid-month sell-off, despite widening credit spreads. For Q1/YTD, the CRTx® AGG is up 3.82%, still edging out broader rates and IG/HY benchmarks for the year so far.

The CRTx® Aggregate posted a 1.53% total return for February, the 4th month in row of positive gains for the index. Benchmark GSE CRT was able to run counter to the red seen in broader markets over the month as a higher, more inverted curve helped ravage stocks and fixed rates, while the latest STACR tender, bull-flattening of the credit curve, and a negative supply technical helped buoy CRT sector performance.

The CRTx® Aggregate starts 2023 in kind with the broad bond/stock market rallies, surging 2.43% in January as the curve bull flattened/inverted MoM even more, and spreads across most sectors followed tighter. Gains were seen across virtually the entire the CRT complex, with newer 2021/2022 deal vintages leading the way.

The CRTx® Aggregate turned in a strong finish to the year, gaining 2.09% MoM in December, and closed out Q4 returning 1.68% QoQ. For full-year 2022, the Index eked out a positive 0.49% total return; well below carry, but much better than the broader fixed rate benchmarks that were hit harder by significantly higher rates and extraordinary volatility. Within the CRT complex though, annual performance was mixed as newer issues, especially B tranche variants, ended in the red YTD while seasoned paper made out much better.

Conference Panel: The Search for Yield in ABS - Issuance Patterns and Issuer Alternatives, Fundamentals And Credit Performance, Technicals And Relative Value, and Market Outlook.

The CRTx® Aggregate posted a 0.61% gain in November, ending a significant 2-month losing streak as most fixed income and equity markets rebounded off recent lows throughout the month. CRT underperformed major bond sectors as a lower belly/long end of the curve boosted fixed rates, especially longer-duration IG and MBS. Intra-complex, the top/middle of the capital structure and newer issues led gains, but YTD the standard CRTx® Aggregate is still down -1.57%, while the CRTx® RNI™ (Rolling New Issues) Aggregate is at -5.34% with one month to go in the year.

Conference panel: Manager/Investor Roundtable
A discussion of the key topics impacting both issuers and investors such as: how they balance their respective needs and wants; trends in underwriting/acquisition and risk/portfolio management in the current volatile environment; and current liquidity, pricing, and risk/reward differentials for BSL vs. MM CLOs. As well as an examination of the evolution of the MM CLO investor base and borrowing sector diversification trends and outlook.

Structured Credit Investor (SCI) 2022 Middle Market CLO awards advisory board provided invaluable input in the selection process, with final selections for the awards made by the SCI editorial team, based on the pitches received, colour from other market participants and SCI's own independent reporting.

The CRTx® Aggregate fell for the 2nd month in a row, posting a -1.01% total return for October, with red seen across most of the CRT complex as even higher rates and vol weighed heavily on fixed income markets, especially rates, IG, and structured finance sectors. The latest STACR tender offer helped soften the blow somewhat, but YTD, the standard total market CRTx® Aggregate has now returned -2.17%, while the CRTx® RNI™ (Rolling New Issues) Aggregate is now -6.37% for the year.

Conference Panel: Market Outlook for GSE CRT - What is the expected issuance volume for GSE CRT transactions for 2023 and beyond? And what are the drivers of strategy for the GSE’s? How are current GSE programs performing? Have there been any significant structural changes or developments? What operational and supervisory changes can be expected for the GSEs in the near future and are these expected to impact their approach to CRT? Resulting impacts on CRT following the FHFA case ruling. Risk profile across new credit protection bonds purchased by GSEs as a result of revised capital rules. Impact of GSE reform, lender regulation and affordable housing initiatives

September saw the CRTx® Aggregate stumble in kind with the broader markets, returning -1.03% MoM as fixed income and equities were thoroughly roiled by higher rates, wider spreads, rising volatility, and a resolute Fed. For Q3 though, the CRTx® still managed to end positively, finishing up 2.42% with some help from significant July/August tender premiums. YTD, the standard total market CRTx® Aggregate is down 1.17%, while the CRTx® RNI™ (Rolling New Issues) Aggregate has returned -5.49%.

The CRTx® Aggregate gained a substantial 3.21% in August, the 2nd positive month in a row, as the Index continues to recover from the 2022 lows hit in mid-July. With the curve “tsunami twisting”, CRT solidly outperformed major fixed income asset classes as rates and IG/HY suffered from higher MoM Rates, and equities moved net-lower for August.

The CRTx® Aggregate gained 0.27% in July, ending a 2-month losing streak, but returning below sector composite carry. With the curve bull flattening/inverting and major asset class spreads tightening, CRT soundly underperformed rates and IG/HY for the month, although CRT finished July on an upswing.

The CRTx® Aggregate lost 0.98% MoM in June, and finished Q2 down 1.57%. A range of headwinds, including ongoing inflation/recession fears, a bear flattening curve, wider credit spreads, and subdued liquidity drove widespread bond and stock market losses. Collectively, the CRT complex still manages be the “least worst”, edging out other major sectors so far this year, albeit from the negative side.

Heightened volatility persisted in May and the CRTx® Aggregate lost 1.03% for the month, making it 3 out 5 months YTD the Index finished in the red. With a myriad of domestic and geopolitical issues continuing to press on markets, CRT underperformed the major fixed income sectors...

Conference Panel: Macroeconomics and Risk Transfer Market Overview - Macroeconomic and Geopolitical risk factors, and their effect on the USK Risk Transfer market; War, Inflation, Rate Hikes, Pandemic Recovery, Supply Chain and Labor Pressure; Review of 2021 and 22H1 performance and a 22H2 forecast – Outlook for issuance and performance per sector and geography; Market technical and fundamental trends; Credit performance trends and relative value for Risk Transfer; U.S. banks use of risk transfer (methods, structures) to address their capital requirements.

The CRTx® Aggregate managed to gain 0.44% in April, ending a 2-month losing streak, as the Fed, inflation, and war continued to weigh on markets. Overall, CRT outperformed major fixed income sectors with the curve up 40-50bps and IG/HY spreads wider, while CRT coupon resets rose. Intra-complex, performance improved from last month’s declines as CRT steadied somewhat on firmer new issue spreads vs. the March wides, and net supply remained high.

Conference Panel: Mortgage Risk Transfer - The GSE credit risk transfer market has been subject to a great many changes lately. This panel looks at the Enterprise Regulatory Capital Framework, the amendments to it, and what it all means for capital treatment of CRT transactions. It also examines blossoming new issue volume, changes in the mandate of the FHFA and latest developments in the mortgage insurance linked note market.

As the Ukraine/Russia conflict raged on and the curve continued to bear-flatten, the CRTx® Aggregate posted a -1.04% decline in March, the 2nd negative month in a row. For Q1/YTD, the Index closed down 1.96% as most major bond and stock market aggregates also finished Q1 well in the red. On top of the CRT credit curve widening, March concluded Q1’s record pace for benchmark GSE CRT issuance, which brought commensurate supply pressures.

MF&Co's founder Mark Fontanilla has been appointed to the Information Management Network (IMN) 2022 U.S. Risk Transfer Advisory Board, which makes expert recommendations regarding IMN's annual Investor's Conference on U.S. Risk Transfer. This well-regarded industry event covers important topics on the risk transfer markets for U.S. assets, including GSE CRT, U.S. bank balance sheet management, mortgage insurance and reinsurance, catastrophic insurance and reinsurance relating to real estate assets, and consumer risk transfer.

Global markets swooned as the Ukraine/Russia conflict unfolded through February. With the turmoil, the CRTx® Aggregate lost 1.00%, the worst monthly total return (besides the beginning of the COVID onset) since Feb. 2016. As equity and fixed income markets were seeing red, the CRT credit curve moved markedly wider amidst a record month for benchmark GSE CRT issuance.

The CRTx® Aggregate index managed to eke out a 0.06% return for Jan. amid a higher/bear flatter curve, wider credit spreads, and both bond and stock market aggregates finishing Jan. well in the red. While CRT in mass nominally outperformed other markets, intra-complex was mixed, with more recent-issue B classes providing most of the drag, while seasoned issues held in much better.

The CRTx® Aggregate index ended December up 0.30% for the month, 0.63% to end Q4, and closed out 2021 with a 5.86% total return. In a reversal of 2020, the CRTx® AGG outperformed other major rates and credit sector benchmarks YTD as a 60+bps higher curve overwhelmed 2021’s firmer credit spreads, save for HY, which performed comparably to, but in the end still lagged, CRT.

The CRTx® Aggregate Index posted a +0.15% gain for November, as vol moved increasingly higher and credit spreads widened. For Q4 so far, the CRTx® is up 0.33%, and YTD up 5.54%, continuing to outperform major rates and corporate credit sectors that have been affected by net-higher 2021 rates. Credit/deal performance is still trending positively, although the CRT credit curve bear-steepened again. Gross supply has been brisk in Q4 (2nd highest qtr. volume in history), but net supply is down YTD in large part from tender activity.

The CRTx® Aggregate Index posted a +0.18% gain for October, returning below effective carry as credit curves bear-steepened while the yield curve bear-flattened. YTD the Index is up 5.39%, still outperforming other rates and corporate credit sectors, as FNMA/CAS returned to the market and FHLMC/STACR also printed in October, making for the biggest benchmark GSE CRT issuance month of the year at ~$2.7B.

The CRTx® Aggregate Index gained 0.55% in September, and finished Q3 up 1.08%, outperforming other bond sector benchmarks as the curve moved higher/steeper and corporate credit spreads inched wider in Q3. FHLMC’s tender offer, FNMA’s return plan, and the latest STACR deal made for an eventful month in CRT.

The CRTx® Aggregate Index finished August gaining 0.25%, outpacing most other major fixed income sector benchmarks MoM, save for HY, as the curve moderately bear steepened. YTD, benchmark GSE CRT is still outperforming rates and IG/HY as markets head towards summer’s end.

The CRTx® Aggregate started Q3 up 0.29% for July, lagging major fixed income sector benchmarks that were buoyed by July’s lower/flatter curve. The CRTx®’s 4.37% YTD gain still outpaces aggregate rates/corporate return benchmarks so far for 2021.

The CRT credit curve continued to bull-flatten as recent-issue SUBs (Bs) drove the majority of June’s CRTx® AGG 0.68% gain. The Index ended Q2 up 2.45%, and up 4.07% YTD.

MF&Co's chief strategist Mark Fontanilla will be speaking alongside other industry experts on the "Middle Market CLO" panel at SCI's 1st Annual CLO Special Opportunities Seminar 2021.

MF&Co's chief strategist Mark Fontanilla will be speaking alongside other market professionals on the "CRT Trading and Analytics" panel at the IMN Virtual Investor Conference on Risk Transfer.

The CRTx® Aggregate finished May up 0.51% MoM, so far returning 1.76% QTD, and 3.37% YTD. An incrementally flatter CRT credit curve, gently better credit/structure risk metrics, and continually supportive technicals helped extend the CRTx® win streak to 2 months in a row of positive total returns.

The CRTx® Aggregate posted its best monthly return of the year, ending April up 1.25% MoM, and reversing March’s volatility-led decline. A flattening of the CRT credit curve, improving credit/structure performance, and supportive technicals helped the CRT sector rebound from March.

MF&Co's chief strategist Mark Fontanilla will be speaking on "What A Difference a Year Makes: Mortgage CRT In The Time of COVID" at SCI's 5th Annual Risk Transfer & Synthetics Seminar 2021.

The CRTx® Aggregate returned -0.18% in March, breaking a 7-month positive return streak as demand was volatile, new-issue spreads widened, and cross-asset credit yields had moved relatively cheaper. The CRT market still ultimately outperformed most other major fixed income sectors MTD/QTD/YTD, closing Q1 up 1.61%, as a higher/steeper curve continued to pressure rates and IG/HY. The CRTx® Aggregate Index basket for April starts at $48.76 billion in market value across 236 constituents from 97 deals.

SCI 3/5/2021: Middle Market Opportunities: MM CLOs still offer relative value and continued innovation...“MM CLOs are positioned favourably against broader credit, according to Mark Fontanilla, founder of Mark Fontanilla & Co……

MF&Co's chief strategist Mark Fontanilla speaks with Al Yoon on DebtWire's "ABS In Mind" podcast series regarding the latest CRTx® index performance and relative value in the CRT sector.

The CRTx® Aggregate ended February up 0.59% MoM, extending its positive monthly return streak to 7 months in a row, and has returned 1.80% YTD. The CRT market continues to outperform major rates and corporate credit sectors this year, despite IG/HY tightening, as the curve moved markedly higher and the 2s/10s spread bear-steepened another 30bps. The CRTx® Aggregate Index basket for March starts at $48.86 billion in market value across 235 constituents from 95 deals.

MF&Co's chief strategist Mark Fontanilla will be speaking alongside other industry experts on the "Trading Opportunities Roundtable: MM CLO secondary market relative value explored" panel at SCI's 2nd Annual Middle Market CLO Seminar 2021.

The CRTx® Aggregate opened 2021 up 1.20% MoM for January, nearly identical to the pre-COVID 1.21% total return from 2020’s opening month one year ago. CRT outperformed other major rates and corporate credit sectors as the curve bear steepened ~20bps. Generally firmer spreads across the CRT complex, a flattening of the credit curve, along with better new-issue pricing from the 1st STACR deal of the year, helped buoy the CRT sector last month. The CRTx® Aggregate Index February basket starts at $48.3 billion in market value across 232 constituents.

MF&Co's chief strategist Mark Fontanilla will be speaking alongside other industry experts on the "CLO Market Update Roundtable– US" panel at Opal Group's Global ABS and Structured Finance Summit 2021.

Bloomberg 1/22/2021: Normally Trouble, Refinancings Are Boosting Some Mortgage Bonds - "When homeowners refinance their mortgages, bond investors often get hurt, but a small corner of the debt market is ironically benefiting from it.....The “supplemental subordinate reduction amount,” which was added to entice potential investors, makes it so payments can pick up even if delinquencies remain high, according to Mark Fontanilla, whose eponymous company created the CRTx Credit Risk Transfer Return Tracking Index. In these deals, once an existing CRT’s size is big enough compared with the unpaid balance of its reference pool, principal payments will resume despite any failed delinquency tests....."

The CRTx® Aggregate finished 2020 strong, ending December up 1.91% MoM, and Q4 positive by 4.16%, while closing out the year with a relatively modest, but meaningful 2.26% YTD total return. The COVID-19 pandemic’s extraordinary stress on the CRT market in Q1, where the CRTx® Aggregate lost nearly 25%, and the sector’s subsequent recovery, lagged other rates and credit sectors substantially, but the rebound in market values, credit performance, issuance, and market technicals all helped benchmark GSE CRT end 2020 on a number of positive notes. The CRTx® Aggregate Index starts 2021 at $47.7 billion in market value (vs $49.7 billion at the beginning of January) across 230 constituents.

SCI 11/24/2020 - Structured Credit Investor announced its SCI Capital Relief Trades Awards 2020 Roll of Honour, and Mark Fontanilla & Company was named "Analytics Firm of The Year".

The CRTx® Aggregate finished October up 0.68% for the month, once again outpacing most other major market benchmarks month over month as equities net declined and the curve bear steepened. October’s CRT market values generally improved overall as sector volatility stayed contained amidst rate volatility edging up and the curve bear steepening. The latest reference pool DQ figures came in generally improved in aggregate, although a few deals ticked up in the October statements. The latest STACR 2020-DNA5 deal enters the CRTx® November basket, which will start out at $45.57 billion in constituent market value, an increase of 1.6% over the October basket.

Bloomberg 10/26/2020: A $50 Billion Housing Bond Market Is Stuck in Regulatory Limbo - "A $50 billion bond market once heralded as the future of housing finance has been stuck in limbo since the start of the coronavirus crisis, and now proposed regulatory changes have left investors worrying that they might be left holding the bag.....At issue are so-called credit-risk-transfer securities offered by Fannie Mae and Freddie Mac. They are tied to Fannie and Freddie’s mortgage-backed securities and pay investors principal and interest as long as the borrowers don’t default. CRT bonds have a market capitalization of about $45 billion, according to data from market research firm Mark Fontanilla & Co....."

The CRTx® Aggregate Index ended September up 1.11% for the month, outpacing most other major fixed income sectors. For Q3, the Index gained 2.41%, lagging only HY for the quarter. September’s CRT market values were modestly improved as volatility remained lower and the latest reference pool credit performances came in largely contained, albeit at persistently elevated levels. With the latest STACR 2020-HQA4 deal printing, the CRTx® October basket will start out at $44.87 billion, net little changed from September’s constituency.

The CRTx® Aggregate Index posted a solid 1.69% total return in August, recouping July’s  -0.39% decline and then some. Index gains were led primarily by a surge in the earliest-vintage fixed severity deals, and overall firmer spreads for Lower Mezzanines across the board. CRT outperformed the major fixed income sectors for the month as the curve bear-steepened, but CRT sits at -2.89% YTD, still well behind rates and IG/HY for 2020 so far.

After a remarkable +27% rebound in Q2, the CRTx® Aggregate Index started Q3 modestly down, posting a -0.39% total return for July. Benchmark CRT has not quite recovered its Q1 declines and sits at -4.51% YTD, still lagging other major markets, including rates, IG, and HY, which all rallied last month, and are all now positive for the year.

MF&Co's Mark Fontanilla is slated to speak alongside other industry experts at IMN's RMBS Sector Virtual Series: COVID-19: A True Test to the Functionality of CRT.

The CRTx® Aggregate Index closed out Q2 strongly, gaining 9.04% in June, and finishing the quarter up 27.16%. The Index had been down over 25% YTD at the end of Q1 during the beginning of the COVID-19 market fallout, but now sits down “only” 4.13% YTD at the end of Q2. June/Q2 CRT returns beat all other major fixed income sectors, but benchmark CRT still lags YTD as both CRT and HY remain negative.

CRTx® Aggregate Index continued to regain lost ground in May, returning 7.03% for the month, following the 8.97% rebound in April. QTD, the CRTx® is up 16.62%, beating most other major fixed incomes sectors, including HY’s nearly 10% 2nd quarter comeback so far. However, YTD, the CRT market still lags with a COVID-19 influenced -12.08% total return, while most other rates and credit sectors (except HY) are positive for 2020. 2018-2020 LMEZZ and SUBs led the way, while the earliest fixed severity tranches lost more ground.

WSJ 5/27/2020 - Fannie and Freddie’s Capital Dilemma: "A new proposal would give the mortgage firms a sizable capital cushion to protect taxpayers but could complicate their potential public offerings" (including quotes from MF&Co's Chief Strategist Mark Fontanilla and a reference to the CRTx® Index.

Following the broader markets, the CRTx® Aggregate Index rebounded in April, posting an 8.96% total return for the month, taking back some of the stunning 25%+ drop in March as COVID-19 related stress continued. CRT outpaced other fixed income sectors such as HY, which gained over 5% in April, but the CRT sector still has a bigger return deficit to overcome. While aggregate CRT performance was up for April, technicals and fundamentals continue to drive differences across the CRT complex.

Bloomberg 4/3/2020: After $50 Billion of Losses, No One Comes to Save the Mortgage Market - "The market for mortgage-backed securities was in free fall, with fear running rampant and banks seizing collateral......“For buyers in this market, it’s about willingness and ability right now,” said Mark Fontanilla, who owns a market strategy consulting firm that specializes in structured finance. “Things are so uncertain, you need to have deployable, stable capital to be able to hold positions, especially less liquid ones, through the uncertainty.....”

The CRTx® Aggregate Index plummeted an extraordinary 25.28% in March to its lowest level since March 2016, wiping out 4 years of Index gains in about 4 weeks. Escalating economic and world markets fallout from COVID-19 ravaged CRT and other structured product sectors as liquidity and credit risk outlooks were severely tested. While COVID-19 was the spark of current crisis conditions, mortgage REITs were the fuel that ignited extreme CRT sector volatility as fast-falling prices prompted a wave of margin call pressures and large-scale selling. Indicative of the stress, CRTs went from trading on discount margins to often trading on a dollar/yield basis. Benchmark CRT prices have swung from premiums to discounts, with over 95% of outstanding CAS and STACR classes trading below par in March, versus the exact opposite in February. Dollar handles ranged anywhere between $40-00 and $100-00 to close out Q1.

The CRTx® Aggregate Index posted a negative 16bps return in February as coronavirus-related volatility pressured world financial markets. A risk-off rally throughout the month, culminating with the biggest yield declines in the final week of February, hit equity markets heavily in favor of longer duration rates products. The benchmark CRT market underperformed vs. most other fixed income sectors, which finished net positive last month despite general spread product widening, except for HY which continues to show negative returns YTD.

January’s significant bull-flattening in the CRT credit curve spurred the CRTx® to a relatively strong 1.21% total return to start 2020. This was the highest monthly total return since January of last year, with excess return at 108bps for the month. Despite a relatively strong performance, the CRT sector still lagged rates and IG, which benefited from a substantial bull-flattening of the yield curve and the commensurate duration-related gains, but outperformed HY, which saw overall spreads widen.

The CRTx® Aggregate Index posted a 0.65% total return in December, and finished 2019 up 6.30% (vs. 2.79% in 2018). In a year that saw lower rates and rallying credit buoy most financial markets to solid, broad-based gains, CRT finished the year strongly, with the CRTx® up 1.48% in Q4, outperforming most major fixed income indexes over the same period, except for HY benchmarks which showed quarter returns in excess of 2.00%.

The CRTx® Aggregate Index finished November up 0.48%, beating out most other major fixed income indexes as a 9-10bps backup in the curve weighed on fixed rates. CRT spreads overall moved slightly tighter, and seasoned 2015-2016 LMEZZ paper outperformed, helping drive sector returns. While CRT has lagged rates and corporates for the year, in Q4 the sector has outperformed, with the CRTx® up 83bps two-thirds of the way through the quarter, leading even IG and HY, which currently sit at ~+70-80 bps QTD.

Bloomberg 11/13/2019: JPMorgan Leads ‘Next Little Big Thing’ in Mortgage-Risk Market - "JPMorgan Chase & Co. may be leading the next trend for banks seeking to shift risk away from their mortgage portfolios -- if regulators give Wall Street the green light. The deal last month mimics the credit-risk transfer operations of Fannie Mae and Freddie Mac, using the form of a credit-linked note with payments dependent on those from mortgage loans held on the bank’s balance sheet. It offloaoffloaded a portion of the credit risk on about $750 million worth of mortgages and could “prove to be the next little big thing” if regulators allow such deals to continue, according to Amherst Pierpont Managing Director Chris Helwig....By the end of June they had such transactions on $3.1 trillion worth of mortgages, according to a recent Federal Housing Finance Agency report. Each transaction was structured into multiple amortizing, sequential-paying, floating-rate securities indexed to 1-month Libor, according to Mark Fontanilla, whose eponymous company created the CRTx Credit Risk Transfer Return Tracking Index....."

The CRTx® Aggregate Index was up 0.34% in October, bringing the YTD total return to 5.11%. With the Fed cutting another 25bps and the curve bull-steepening for the month, the CRT complex modestly outperformed rates sectors, while incrementally lagging IG/HY. Within the CRT complex, good carry-net-paydowns in 2013-2016 LMEZZ classes compensated for lagging 2019 LMEZZ and SUBs, which saw some widening for the month. Overall CRT excess return volatility was lower in October, in kind with the broader fixed income market. While aggregate CRT volatility remains low (1.82% for the trailing 12 months), SUBs have continued to show higher vol than most bond sectors for the year.

The CRTx® Aggregate returned 0.65% for September, finishing up 1.07% for Q3. September was a rare 2019 outperformance month for CRT versus the major fixed income sectors as the recent rate sell-off buffeted longer duration fixed rate markets. A rebound in seasoned 2015-2017 LMEZZ deal vintages and rallying in recent-issue SUB paper led CRT complex performance. The CRT credit curve saw more bull-flattening on solid demand for credit risk, as evidenced by the latest STACR HLTV deal printing at tighter levels. CRT excess return volatility edged up slightly for the month to 1.82%, which is still on the lower end of the fixed income spectrum.

Amid the highest market volatility so far this year, the CRTx® Aggregate posted a -0.22% decline in August as spreads widened and seasoned paper once again lagged. 2015/2016 LMEZZ deal vintages, and now the 2017 vintage, came under more pressure last month as paydowns remain elevated. Balancing out the CRT complex, 2018/2019 deals continued to outperform, returning 41bps overall in August, while B-pieces in aggregate came in with a solid 73bps return as SUB spreads held in relatively well. Equities were down for the month, while the major fixed income sector indexes benefited heavily from another 40-50bp rally in the curve, especially the longer duration IG segment which continues to be the leading bond sector for the year. While CRT has understandably lagged into the rate rally, excess return volatility is still better contained relative to other major market sectors.

The CRTx® Aggregate posted a 0.64% return in July as B-pieces and 2018/2019 deal vintages continued to drive overall sector performance. Versus major fixed income indexes, the CRTx® Aggregate outperformed rates and HY, while largely in line with IG for the month. YTD, benchmark GSE CRT still lags other spread segments, but volatility remains relatively lower. The CRT credit curve has continued to rally since January, with 2018/2019 LMEZZ spreads ~25-35bps tighter and SUB stack prices moving several points higher, while seasoned LMEZZ issues still underperform. CRTx® Aggregate monthly excess returns came in at +44 bps, while volatility was marginally higher at an annualized 2%.

The CRTx® Aggregate eked out a 0.27% return in June as seasoned high premiums continued to weigh on the CRT complex, offsetting newer issue returns. For Q2, the CRTx® was up 1.08% and 3.64% YTD, underperforming spread and rates sectors as equities and the curve continued to net rally for the year. Credit remains favored over convexity across the CRT complex with recent issue 2018/19 deal vintages and SUB spreads firming, while older issues moved wider. CRTx® Aggregate excess returns for June were marginally positive at +9 bps, while daily volatility picked up throughout Q2.

The CRTx® Aggregate had its first down month for 2019, posting a -0.19% return in May as equity markets were off sharply and the curve rallied. With credit spreads coming under pressure, the front half of the CRT credit curve moved wider and steeper. Into a 30+ bp rally in rates, the CRTx® Aggregate lagged the major fixed income aggregate, IG, and rates indexes, which all had positive returns for the month, but outperformed HY. CRTx® Aggregate excess returns in May were negative, but daily volatility continued to be lower than the broader fixed income sectors.

The CRTx® Aggregate opened up the 2nd Qtr of 2019 with a solid 1.01% total return in April as the CRT credit curve rallied back from March, more than reversing that month’s market value declines. April’s tally brings the CRTx® YTD return to 3.56%. With the yield curve bear-steepening and equities up, the CRTx® outpaced the major fixed income aggregate, IG, and rates indexes, but lagged the continued strong performance in HY. CRTx® Aggregate excess returns for April were +80bps, while the daily volatility trended even lower and remained milder than the other major fixed income sectors.

Mark Fontanilla slated to speak at IMN's 4th Annual Credit Risk Transfer Symposium in New York, NY on April 25, 2019.

The CRTx® Aggregate returned a modest 2bps for March as the strong rally in rates favored convexity over credit. In Q1/2019 YTD, the CRTx® is up 2.52%, more than offsetting the 1.44% decline in 4th Qtr of 2018. Versus the major fixed income aggregate and credit indexes, the CRTx® lagged for the MTD/QTD/YTD periods, but CRT volatility remained markedly lower on a relative basis. CRTx® Aggregate excess returns for Q1 2019 were +194bps, while the daily volatility for March came back down to pre-Q4 levels.

Mark Fontanilla scheduled to speak at SCI's 3rd Annual Risk Transfer Synthetics Seminar in New York, NY on March 12, 2019. SCI quote from Mr. Fontanilla - "The market value of outstanding U.S. agency CRT securities issued via Fannie Mae’s CAS® and Freddie Mac’s STACR® programs has reached over $50 billion. Based on the CRTx® index, sector total returns came in at 2.79% for 2018, outperforming most major market sectors last year. As part of our panel discussion, we will go over sector performance, structural variations, and the distinctive risk/reward relative value proposition that US CRT securities present to investors."

The CRTx® Aggregate posted 67bps in total return for February as the index crosses $50 billion in market value for the first time in history. For 2019 YTD, the CRTx® is up 2.50%, in line with major IG indexes, but well behind the extraordinary performance seen in HY so far this year. As with other spread sectors, the agency CRT market continued to improve in February, with spreads recovering from their Nov/Dec widening (and then some). The CRT credit curve flattened further, and index volatility dropped back towards October levels.

The CRTx® Aggregate starts 2019 off firmly positive with a 1.82% in total return for January, after closing 2018 up 2.79% YTD. Financial markets overall rebounded in January, following December’s dramatic selloff and market volatility, and CRT was no exception. Versus other major sector indexes, the CRTx® outperformed broad bond market aggregates and corporate IG, while lagging very strong returns in HY.

The CRTx® Aggregate posted -78bps in returns for December, and -144bps for the 4th Qtr, but ended 2018 with a solid 2.79% total return YTD, despite dramatic market volatility through year-end. Both equity and fixed income spread markets experienced significant pressure in December, but the CRT sector outperformed, as major equity indexes closed down significantly for the year (~-5.00% or lower), while broad-market bond indexes ended virtually flat, and major credit-sector indexes closed 2018 in negative territory (~-2.00% to -2.50%).

The CRTx® Aggregate declined 38bps in November as credit risk sectors across the fixed income market were again under pressure during the month. This was the 2nd straight month of negative returns for the Index, but the 2018 YTD total return is still solidly positive at 3.61% as of November month end. The CRT sector continues to show favorable performance and less relative volatility versus comparable credit segments such as HY and IG corporates.

Into a broad-market selloff for bonds, the CRTx® posted a 28bp decline in October, only the 3rd down month this year, ending the Index’s streak of 6 straight months of positive total returns. The CRT market continued to outperform other spread products both month over month and YTD. For 2018, the CRTx® is up 4.01% through October, while credit sectors such as IG and HY indicate either negative or modestly positive total returns for the year.

The CRTx® returned 49bps in September, making it 6 straight months of positive gains, shrugging off the recent threat from Hurricane Florence. For Q3, the Index was up 1.89%, while YTD returns came in at 4.30%, outperforming most broad-market credit sectors, as the CRT credit curve continued to remain firm. The rebalanced Index market value for October is up slightly to $48.63 billion as 4 classes from the new STACR 2018-DNA3 deal enter the CRTx®, bringing the total index constituency to 184 securities across 63 deals.

Bloomberg 9/13/2018: Mortgage-Backed Securities Traders Have Seen This Storm Before - "Hurricane Florence is barreling toward the southeast coast of the U.S. and billions of dollars of commercial and residential properties tied to mortgage-backed securities. Traders aren’t too worried.......That’s because fewer mortgage-backed securities are in the landing zone compared with last year’s devastating storms, which rattled markets but in the end didn’t end up causing major losses or defaults.......In part of the RMBS market without government backing, so-called credit risk transfers -- which were sold to investors by Fannie Mae and Freddie Mac -- about 4 percent of the nearly $45 billion market are exposed to the hurricane, according to Mark Fontanilla...."

The CRTx® Aggregate continued its 3rd Qtr march higher, adding another 67 bps in August to bring the YTD total return to 3.78%, compared to the 7.42% index total return over the same period in 2017. While the 2018 YTD is behind last year, CRTx® returns are still healthy and have outpaced similar-rated high yield corporate sectors so far. Further bull-flattening in the credit curve helped nominal return attribution look similar to last month, with paydowns providing another 3bps of drag, and carry was just 1.5bps lower due to 1 less day of accrual between month ends.

The CRTx® Aggregate monthly returns for July were up 0.71%, the 4th straight up month in a row, with sector tone improving versus June. Firmer spreads, a few days extra carry, and steady paydowns helped July’s index performance outpace June. Paydowns continued to come in at approximately 1% of the Index’s Aggregate UPB for July, providing a recently consistent -3pbs in drag to overall returns.

Mark Fontanilla & Co., LLC (MF&Co) announced today the introduction of the CRTx® RNI™ (Rolling New Issues) Index, a new variation of its benchmark agency credit risk transfer (CRT) securities total return index, the CRTx®. The CRTx® RNI™ is a first-of-its-kind fixed income index that tracks the performance of a dynamic “rolling” basket of the most recently originated CRT securities that have been issued by Fannie Mae (FNMA) and Freddie Mac (FHLMC) within a trailing 12-month period.

CRTx® posted positive monthly returns of 0.10% for June, despite prices overall moving lower. Q2 total return outpaces Q1 by 22bps, index YTD up 2.36%. Rebalanced aggregate Index market value for July rises 1.0% versus May to $47.02 billion. New STACR 2018-DNA2 classes enter the CRTx® for July.

The CRTx® Aggregate monthly index returns for May 2018 were positive, up 0.34% for the month versus 0.85% in April. While sector prices month over month were incrementally lower, May benefited from an extra day of carry versus April (31 days vs. 30 days) and marginally bigger coupons as short rates continued to inch higher. Paydowns held at a relatively steady pace for the month (approximately 1% of the Aggregate UPB), but continue to provide a modest drag to Index returns given the sector premiums.

The CRTx® Aggregate saw monthly returns for April 2018 up 0.85% for the month, new Low LTV and High LTV Sub-Indexes announced, and April month-end Rebalancing updated.