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First Trust Unveils US Agency Monitor

To provide a simple and clear picture of the risk and return relationships for the wide variety of security types issued by the US agencies

The institutional capital markets department of First Trust Portfolios (First Trust), an Illinois-based regional broker dealer, has introduced the US Agency Monitor. First Trust aims to provide a picture of the risk and return relationships for the variety of security types issued by the US agencies, including discount notes, bullets, callables (of many types) with coupons that are fixed, floating or step-up in nature.

Greg Coffman, senior vice president at First Trust, said: “We are seeking to provide a framework for comparing risk and return in order to assess relative value. The monitor offers an assessment of where investors can find the greatest value contribution per unit of interest rate risk taken.

“We recognize that this relatively simplistic measure does not consider potential changes in a security’s price for changes in yield spreads, OAS, or volatility. However, the measure does give us a sense for the basis point compensation (Yield) relative to some standardized measures of a security’s interest rate risk assuming a 100 basis point shift in rates.”

Jeff Westergaard, senior vice president at First Trust, said: “The First Trust US Agency Monitor is part of our effort to provide valuable and meaningful insight to our clients. It is consistent with our goal of empowering our clients in their investment decision making process. The monitor will be joined by a mortgage backed security monitor that we will begin publishing in December.”