When is the final maturity on a mortgage security not really the final maturity? Well, it depends.
Recently, I talked with a community banker who had a question about the Bloomberg yield tables. She said that she was looking at a mortgage-backed security and noticed that the maturity date shown at the top of the yield table wasn’t matching up with information in the “principal window” section at the bottom of each yield table scenario. She wondered why that would happen.
Different Final Maturities on the Yield Table
If you look at the Bloomberg yield table below, you’ll notice that the MBS pool’s final maturity doesn’t match up with the projected final maturity at the bottom of the yield table, even if the prepayment speed is 0 CPR (in other words, no prepayment):
Source: Bloomberg
At the top of the yield table, you will see the final maturity date for the mortgage security. In the example above, you’ll see it has a final maturity in November 2028.
The other maturity dates are near the bottom of the yield table in each of the what-if scenarios, near the average life and duration data. This section is called the principal window, and it shows the date period when an investor could expect to receive principal payments from their investment, given the assumed prepayment speed.
Typically, as the prepayment speed changes, the dates in the principal window can adjust. For example, if we had a mortgage security that began to prepay more quickly, the final month in the principal window could be earlier than a scenario with a slow prepayment.
However, if you look at the final maturity dates, you will notice that the latest ending date in the principal windows is always several months earlier than the final maturity date on the pool. In the example above, it happens in February 2027.
It does not matter what prepayment speed we use – the principal window never extends to match the final maturity date. So what is going on?
Why the Final Maturity Can Vary
Here is what is happening. The maturity date at the top of the yield table represents the final contractual maturity for the mortgage-backed security based on the loans in the mortgage pool when the investment was initially created.
Source: Bloomberg
The date is based on the latest final maturity date from all the loans contained in the security. More importantly, once this date is set, it will never change.
On the other hand, the dates shown in the principal window only consider the remaining loans in the pool. As the loans with longer final maturities pay off, the principal window adjusts to reflect the new current longest final maturity date.
Source: Bloomberg
Unlike the final maturity date at the top of the yield table, the principal window dates get updated, creating a date mismatch.
If you’re evaluating mortgage pass-through securities using the Bloomberg yield table, it’s a good idea to check the final maturity against the latest maturity in the principal window section. You may find that the mortgage pool is a little shorter than the final maturity would indicate because of loan prepayments. It may not be a huge difference, but it will give you a more accurate indication of what you can expect as an investor.
By the way, I’ve created a free guide that will help you navigate your way around the Bloomberg yield tables. It’s called “Understanding the Bloomberg Yield Tables” and provides an overview of all the info in the yield tables and the differences between the different yield table types. If you’re interested, you can download the guide here.
If you’re managing the investment portfolio for your community bank or credit union, you’ve likely looked at your share of residential mortgage-backed securities (MBS). These are securities comprised of residential mortgage loans that are pooled and securitized.
One of the tools you’ll undoubtedly use, and a go-to screen for brokers showing mortgage securities, is the Bloomberg yield table. It’s packed with lots of information about the structure and composition of a mortgage pool.
However, with all the information the yield table contains, it can sometimes feel overwhelming trying to figure out everything you want and need to know. And if you don’t know where to look, it can be easy to miss important information as you evaluate an MBS.
In addition, there’s a little catch – Bloomberg has more than one version. While they have some similarities, there are also differences between them. And if you don’t know about these differences – or even that these screens exist – you might not get a complete picture of the security you’re analyzing.
In this article, we’re going to explore the Bloomberg yield tables. We’ll start with the standard items and areas in all versions. Then, we’ll review each type available and their differences.
The yield table provides a snapshot of information about MBS pools and their underlying loans. In addition, it also lets you analyze multiple “what-if” scenarios simultaneously, which makes it easy to compare the scenarios against each other.
As I mentioned above, there are several versions of the yield table depending on the information you’re looking for, but they all have a similar format. The top section contains the MBS pool and loan characteristics. And there’s a lot of information! Here’s what you will find at the top of the yield table.
Source: Bloomberg
Mortgage Description Info
Let’s start with the basic descriptive information, which includes the security pool number, its CUSIP number, the pool’s coupon rate, and the final maturity date for the security. You’ll also find information about how many loans are in the MBS pool and what percentage of the security’s original principal balance is currently remaining, also known as the factor.
Other high-level information about the underlying collateral is available, including the maximum and weighted average outstanding loan sizes and the weighted average loan-to-value. The top section also includes the top states represented in the pool and a breakdown by year showing when the loans were originated.
Loan-Level Details
The top section also lets you peek under the hood to see some of the loan-level characteristics. For example, there’s info on the weighted average coupon rate, the weighted average months to maturity, and the weighted average loan age, which tells you how old or seasoned the loans are.
Security Prepayment History
But wait, there’s more! The yield tables also include snapshots of a mortgage security’s prepayment history, looking back at the one-month, three-month, six-month, twelve-month, and lifetime periods. In addition, you can view the past year of historical one-month prepayment speeds at the bottom of the screen. It shows prepayment speeds in two ways – in PSA and CPR.
As I said, there’s a lot of information available! And it will allow you to get a deeper understanding of the security and the underlying mortgage loans. Knowing that information will help you identify good and bad characteristics for managing both prepayment and extension risk. These are the key risk exposures you want to consider when evaluating MBS investments.
Prepayment Scenario Analysis
So far, we’ve covered a lot of territory and data on the yield table. But here’s the thing – we’re not done yet! Let’s examine the middle section, where you can analyze multiple prepayment scenarios. These scenarios are based on different prepayment speeds, showing how the mortgage security’s performance changes under various circumstances.
Source: Bloomberg
On the left side, you’ll find the security price. To the right of that are seven columns where you can enter different prepayment scenarios and compare them against each other. Want to see what happens if prepayment speeds are high? You can do that. Interested in seeing how the mortgage security looks if prepayment speeds slow down? The yield table has you covered.
Let’s take a closer look at the information in each column or each scenario. We’ll find the prepayment assumption listed at the top, which can be based on historical or hypothetical speeds. The calculated yield for that prepayment assumption is in the middle of the column. As the prepayment speed changes in each scenario, the MBS yield will also vary.
Finally, at the bottom of each scenario is other information affected by the prepayment speed. This includes the weighted average life of the security, its duration, and the yield spread to the Treasury curve. Again, these numbers will shift as different prepayment assumptions are applied.
So that’s the anatomy of the Bloomberg yield table. The basic layout is the same, no matter what version you use. As I said, it’s full of valuable and helpful information that can help you evaluate and understand a mortgage security and its underlying loans.
Four Types of Yield Tables
Now, let’s move beyond the basic layout. Bloomberg has four versions of the yield table for residential MBS, so let’s review them.
PSA-Based (YT)
The first yield table is what’s known as Bloomberg’s “YT” screen. This is considered the default yield table and is often the yield table a broker will send in an email.
“YT” Screen (Source: Bloomberg)
The YT screen shows the yield of an MBS based on the median street consensus prepayment speeds, which are expressed in PSA. The scenarios show the yield and other info based on an unchanged interest rate environment and up and down 100, 200, and 300 basis points.
Personally, I’m not a huge fan of using PSA for prepayment analysis for two reasons. First, the consensus speeds are based on generic MBS pool types and are not specific to the security. In addition, while the PSA may be helpful in some situations, I find it easier to analyze a mortgage security using a more straightforward constant prepayment speed and not a model containing assumptions that may or may not be applicable. If a broker sends you this yield table, you can request one of the other options below if it’s more helpful.
CPR-Based (YTR)
The second type of yield table is the “YTR” screen. It shows yield scenarios based on CPR prepayment speeds, which is a constant speed.
“YTR” Screen (Source: Bloomberg)
With the YTR screen, you can run whatever prepayment speeds you want to see. If you want to know what the security looks like at 6 CPR, 20 CPR, or 70 CPR, the YTR screen makes it easy. I like this screen because it lets me run what-if scenarios based on recent prepayment speeds as well as hypothetical slower or faster speeds, so I understand how they might affect the mortgage pool.
Historical Prepayments (YTH)
The YTH screen is like the YTR version in that it also presents yield scenarios based on CPR prepayment speeds. However, this yield table uses the historical prepayment speeds for the specific mortgage security.
“YTH” Screen (Source: Bloomberg)
As I mentioned above, the top section contains prepayment speeds for the last month, the average speeds for the previous three, six, and twelve months, and the security’s lifetime. The YTH screen uses these prepayment speeds in its what-if scenarios, allowing you to quickly see how an MBS has behaved based on actual prepayment activity.
When analyzing seasoned MBS pools, I like to use a combination of the YTH and YTR screens. That way, I can see how the mortgage pool has behaved and look for trends on the YTH into while using the YTR info for specific prepayment speeds based on recent monthly speeds or the what-if scenarios mentioned before.
Obviously, the YTH screen won’t help you with a newly issued mortgage-backed security since it doesn’t have any history. But for mortgage securities that have already begun paying down, it can be helpful.
Bloomberg “BAM” Model (YT BAM)
And finally, the fourth version of the yield table is based on Bloomberg’s prepayment model. Several years ago, Bloomberg acquired this model from Barclays and renamed it the “Bloomberg Agency MBS Index Prepayment Model,” or the “BAM” model. The BAM model takes a more comprehensive look at the underlying loans that make up a given mortgage pool and their prepayment behavior.
“YT BAM” Screen (Source: Bloomberg)
One way the BAM model is more helpful is that model breaks out results by specific product types, such as 30-year, 15-year, adjustable-rate, jumbo, and other loan programs. The model also considers borrower behavior based on collateral characteristics, interest rates, and the market environment. These factors include the refinancing cycle, seasonality, creditworthiness, home prices, occupancy type, and loan age.
The YT BAM screen is similar to other yield tables in that the prepayment scenarios are based on unchanged rates and +/- 100, 200, and 300 basis point shifts. The results are also shown in CPR, with each prepayment assumption generated by the BAM model.
In my experience, the BAM screen is pretty good and is an excellent complement to other yield tables. It’s not perfect, and sometimes the prepayment speed assumptions are a little conservative, but the programmers and analysts at Bloomberg have continued to find ways to tweak and improve the model.
Which Yield Table Is Best?
That’s an overview of the four Bloomberg yield tables. Which one is the best? I don’t think there is one. They can all be helpful, depending on what information an investor needs as they evaluate MBS investments.
The key is knowing that the different screens are available, how they differ, and how to use them in combination to analyze residential mortgage pools. That way, you’ll have a clearer picture of MBS investment candidates under evaluation.
Free Guide to Bloomberg Yield Tables
I’ve created a free guide to help you navigate the yield tables called “Understanding the Bloomberg Yield Table.” It contains an overview of the information in all Bloomberg yield tables, and it walks you through the differences between the four different types.
With this information, you’ll better understand what information is available and how to locate it on the yield table. It’ll make analyzing mortgage-backed securities quicker and easier. You’ll know how to decode a yield table and easily analyze MBS investments for quick investment decision-making.
Click on the button below to download your free copy of the guide!
Are you looking for an easy way to view or verify monthly historical payment information for the mortgage-backed securities in your institution’s investment portfolio? The good news is that there’s a Bloomberg screen for that! Here’s how you can use Bloomberg’s Paydown Information screen to grab that information quickly.
The Paydown Information screen, otherwise known as the Bloomberg PDI screen, provides a monthly breakdown of information related to mortgage pools.
Bloomberg Paydown (PDI) Screen
Source: Bloomberg
What makes this screen so helpful is that you can enter the original balance of your MBS holding to obtain customized information based on your investment amount.
How to Use the Bloomberg PDI Screen
To access the PDI screen, you’ll need to enter the mortgage security’s CUSIP number or pool number. Once you are on the PDI summary screen, you’ll want to select the “Paydown” tab. You can also enter your original face amount of the investment here.
When you pull up the mortgage security, you’ll see the following historical information, broken out by month:
Monthly pool factor
Outstanding principal amount after each principal paydown
Principal and interest payments for each month
If you don’t have access to a Bloomberg terminal, you can ask your broker to grab a screenshot for you. Just ask them for the PDI screen for your mortgage CUSIP number or pool number (either one will work). Be sure to ask for the “Paydown” tab.
The Bloomberg PDI screen is a simple way to get customized historical paydown data for a mortgage-backed security. It’s a great way to get the information you need for verification or lookback.
