Forward Guidance
Does Historic Cheapness Of Agency Mortgage-Backed Securities (MBS) Indicate Funding Stress? Dave Goodson, Professor Jeremy Siegel, Jeremy Schwartz, and Jack Farley
Oct 29, 2023
Jeremy Siegel, Dave Goodson, Jeremy Schwartz, and Jack Farley discuss macro view on bonds, stocks, and economy, as well as analysis of securitized products including agency MBS, non-agency MBS, commercial MBS, and CLOs. They cover topics like impact of higher rates, tech company performance, attractiveness of bonds vs stocks, risks and opportunities in non-agency and MBS market, pricing of CLOs, risks in the CMBS market, and asset-backed securities market analysis.
49:34
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Quick takeaways
- Residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS) offer attractive investment opportunities with high yields and historically cheap spreads.
- Securitized markets, including RMBS, CMBS, and collateralized loan obligations (CLOs), can enhance fixed-income portfolios by providing diversification benefits and maximizing returns while managing risk.
Deep dives
The attractiveness of residential and commercial mortgage-backed securities (MBS and CMBS)
Residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS) are seen as attractive investments due to their relatively high yields and historically cheap spreads. RMBS, which include loans made to borrowers with high credit ratings, offer the potential for equity-like returns approaching double digits. CMBS, on the other hand, are viewed as pricing in the risk associated with commercial real estate, especially in the office sector. While CMBS have experienced stress, opportunities can still be found in other property types like multifamily, retail, and industrial. Overall, securitized markets provide an opportunity to maximize returns while managing risk.
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