Macro Voices MacroVoices #449 Harley Bassman: The Magic of Mortgages
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Oct 10, 2024 
Harley Bassman, a portfolio manager at Simplify Asset Management and the renowned Convexity Maven, shares insights into mortgage-backed securities and their pivotal role in the bond market. He breaks down complex concepts and common misconceptions, also discussing the impact of demographics on economic trends. The conversation further explores trading strategies in agency bonds amidst rising interest rates and offers intriguing perspectives on current market dynamics, including gold and uranium trends.
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MBS: A Mysterious Market
- Mortgage-backed securities (MBS) are a large, yet misunderstood, bond market asset class.
- Retail investors rarely trade MBS directly due to complexities like reinvestment risk and tax implications.
Mortgage Bond Mechanics
- Mortgage bonds function similarly to a buy-write, involving buying a Treasury bond and selling a call option.
- Their value depends heavily on interest rates, implied volatility, and the complexities of prepayment risk.
Invest in MBS
- Consider mortgage-backed securities (MBS) as a potentially attractive investment in the current bond market.
- Newly issued MBS offer superior risk-adjusted returns compared to other bond types.