Over the last month, amid concerns about how flat the yield curve was starting to get (and what this might suggest about the economy), the yield curve has obligingly re-steepened 20 bps. The 10-year treasury recently crossed 3.00% on more than one day, climbing back to levels last seen at the end of 2013. In the next several weeks, the release of payroll growth, wage and CPI numbers may tell us more about whether the Fed will be revising down its expected number of rate hikes over the remainder of 2018 and 2019 or if the back end of the curve will continue to ratchet up, preventing the curve from inverting. Credit spreads have also widened by around 20 bps (from AA down through B ratings), totaling about a 40 bps increase in rates for corporate borrowings in intermediate and long maturities over the last month. Closer to our markets, this widening in risk premiums can be observed in the OAS graphs in the CRT monitor, most prominently for our level 0 and level 1 subordination graphs.

The CRT market, now into its second trillion dollars of reference collateral, will be our focus this coming week. On Wednesday afternoon, we convene CRT University for mortgage investors and reinsurers who would like to learn more about this growing sector. AD&Co staff will be moderating three in-depth educational sessions, on deal structure and collateral, GSE credit risk management practices, and data and analytics. Experts on those topics from Fannie & Freddie will be presenting a rich set of material, and the analytics section will include Aon Benfield. For the detailed agenda, click here.

Then, on Thursday, we have the annual CRT Conference co-hosted by IMN and AD&Co, which covers all things CRT. Our first article in this pipeline, by Jin Chen, Richard Cooperstein and Alex Levin, announces the creation of CRT Bond Indices to coincide with this conference. This is an important step in the evolution of any asset class and our authors have several interesting insights. After briefly describing the current and projected size of the CRT sector, they introduce the notion of risk-tiers within the CRT market and show monthly and cumulative returns over time. To me, the most interesting graphs are in Figure 7, where select Tiers are compared to appropriate corporate benchmarks going back to the start of 2015, and in the risk-return profile graph in Figure 8 as a fascinating finish. Our authors look forward to discussing their work with you in person at the conference or by phone or e-mail.

In our second article, Eric Limjoco writes about the support resources available at AD&Co. His article covers our research and publications, model validation documents, a plethora of model performance evaluation tools, and the Excel demo tools we make available. This is perhaps the most concise and complete compendium of all our support resources I have seen in written form and contains handy links straight to the relevant parts of our web site. It is worth bookmarking for future use!

We always look forward to your comments and questions, but most of all enjoy meeting clients in person. So please drop by our booth at the CRT conference, whether it is with a request for particular information, a look at our newest tools, or just to say hello.

The GSE Credit Risk Transfer (CRT) debt market has grown to $40 billion over the last few years, and is probably on its way towards $100 billion in the foreseeable future. CRT market attributes-e.g., CRT debt is liquid, has reliable counter-parties and good transparency, and reflects consistent, high-quality, diversified US mortgage debt-make it a good candidate for an investor-oriented total return index to increase transparency in this maturing market. In this article, we provide examples of how an index can communicate fundamental metrics such as risk/return tradeoffs and relative value.

CRT investment is generally limited to sophisticated investors; meanwhile, the wealth of over 60% of US households is highly concentrated in one asset that is not diversified and has significant transactions cost-their home. With the growth of focused indexes and ETF (exchange-traded fund) investing for the general public, a CRT Index is a first step towards democratizing investment in US mortgage credit. To that end, AD&Co has developed the AD&Co™ CRT Index.

At Andrew Davidson & Co., Inc. we are committed to delivering the highest quality support to our customers. As the front line of our organization, our team of support specialists is dedicated to ensuring client success. Whether through email, phone, or a live screen-sharing session, the AD&Co Client Support Team is available for personalized, timely, and actionable customer service. Our approach to support focuses on empowering you-recognizing that providing software that runs without error is not enough, we strive to equip our users with the knowledge and tools you need to confidently employ AD&Co analytics in your organization.