It's nice to have minds like the ones I'm surrounded with...
Here's an excerpt from someone I have great respect for and took the time to reply to my request for a definition:
Here you go.
"You are correct, that is a CMO mortgage backed security. More specifically, this bond is an "Interest Only" instrument issued by Fannie Mae. This is a standard Bloomberg snapshot that leaves much to be desired since there are layers & layers of supporting data on pages we cannot view. CMO's have become the latest craze but only licensed individuals can participate in or discuss these instruments. Many non-institutional Buyers have jumped into this market over the past 5 months thinking they could purchase a distressed CMO and unwrap the bond, thus ending up with the individual assets that make up the bond. However, many private Buyers have learned the all too important lesson that one cannot do this. The bond will remain intact regardless of the owners intentions. In addition, one must be able to properly "service/house" a mortgage backed security instrument if they are unable to resell on the open market. One might ask, "Why are these bonds trading at such low levels?" One of the many reasons for our credit crisis & economic shortfalls is the mortgage backed securities market. When an initial bond is "issued", one of the standard rating agencies applies a "rating" to these instruments. Bond "ratings" are determined by a myriad of variables such as "loan product - fixed, ARM, niche, FICO score - A/B/C/etc..." that make up the "collateral" portion of the bond. Stronger loan products & FICO scores obviously draw a stronger "rating". When everyone started to realize that Alt-B & Sub-Prime loan products traditionally failed on a greater scale then anticipated, the "issuers" of these bonds began cramming more & more loans into them to offset the increased default rate. (Need more originations in a hurry, open up the underwriting guidelines.) Eventually, the metrics begin working against you and you end up with an inverse index. Now the rating for this particular bond is found on another Bloomberg page but rest assured, that rating will be dropped when Moody's or "Standard & Poor" gets around to reviewing the performance of this bond. Word to the wise...if you are not a licensed securities broker/dealer, leave the CMO market alone. It's a heavily regulated industry that operates directly between broker dealers/RR's & Institutions. You are going to get circumvented and you have zero recourse because once again, only licensed securities brokers can communicate or participate in these types of transactions. Furthermore, unless you have access to a Bloomberg terminal on an hourly basis, you will never know the true market for the instruments you are attempting to sell. I have lost track over the past 2 months how many times I have "evaluated" a CMO being offered by regular brokers only to find out they are so far outside the market, that the trade would never clear the "cage" where the instrument was to be delivered. Furthermore, offering a CMO outside the acceptable market range for that instrument could be construed as fraudulent behavior."
I hope this helps you better understand the complexities of CMO's...
Chris
:beer:
