CMO
#Well, I mean, if you look at the cohorts out there, what you're seeing is kind of an interesting phenomenon now.
For the longest time, longer resets were prepaying faster than short resets.
That's flip-flopped now.
And so you've got season-short resets that are of kind of printing in mid-20s now.
Longer resets, you look at our long reset book, the coupon is 2.70% with a gross mortgage rate of 3 1/4% or so, those are now in the upper teens.
So it's kind of flip-flopped.
So I don't ---+ using that, I don't disagree with your thesis.
Yes, the first quarter was very interesting.
Everything ---+ spreads tightened dramatically early in the year.
The banks weren't buying.
There was very little new production.
The Street didn't have much inventory and there was very little selling.
And it's not uncommon for banks to come in early in the quarter.
Well, as spreads tightened in, then you started to see a pickup in secondary selling, guys taking advantage of tighter spreads, and so shorter resets, for example, tightened early in the year and then started widening out.
If you noticed our marks, our shorter resets were actually down in the quarter.
And then on top of that, you're starting to see a lot of out-month production mainly as the result of rates going up.
There's more ARM production now and so, for instance, in the out months the bigger Tier 1 originators, for instance, in 5/1s that were selling $10 million to $20 million blocks are now selling $20 million to $35 million blocks.
So ARM production as a percentage of production is up right now.
The last number I saw it's about 17% of new production.
Now, that's not all going into agency MBS, that includes jumbos and everything else.
But net to net, the absolute increase in rates has caused ARM production to go up.
Now, the curve flattening has been a more recent phenomenon and so you could see it dip back down again.
But bonds that are coming out now in new production are reflective of when we had about 125 basis points between 2s and 10s and that's come in a little bit now.
So a long answer to your question but there's plenty of supply right now between new issue and secondary selling.
<UNK>, this is Phil.
We don't really break down the average age of the portfolio.
We do give some months to roll, months to reset.
Average months to reset is about 6 months as it has been for quite some time on our current reset classified loans.
All those loans will reset inside of 18 months.
And about 20, 22 months for ---+ or about 40, 41 months for the longer resets and 22 overall for the portfolio.
Yes, and as far as speeds goes, I know you guys look at the different cohorts.
And right now, for instance, ARMs that are resetting for the first time that are 5 or 6 years old, seasoned 5/1s, some of those are ramping up to north of 40 CP<UNK>
Very seasoned non-IO product that's 15 years old is still trending around 20 CP<UNK>
So there's a huge variance in speeds depending upon the age, whether it's IO, different attributes like that.
So I would just kind of say, generically, short resets are trending in the mid-to upper 20s and depending upon how much of the book is concentrated in newer versus seasoned production it's going to be either lower or higher.
I'm sorry, <UNK>, what does ---+ what was your question again.
The curve's calling for a couple of more bumps this year.
(inaudible)
Yes, I think the curve is ---+ next year, I think the Fed funds futures are calling it, for terminal funds, around 2 1/4%.
I think the Feds [dots] implies a terminal funds rate of 3%.
It's been pretty transparent, it seems like they're signaling 2 moves this year.
Who knows what they are going to do next year.
But we really don't try to make a prediction when we're executing our strategy.
We think our strategy works very well in an environment where the Fed's moving gradually and if you some steepness in the curve, if 10s go back out in the high 2s and you get a couple of fed moves, that's not a bad environment for us.
Well, the cost of that capital to us is about 7.75%.
Well, at the margin, we're investing close to 10% right now.
