UBS On-Air: Market Moves Fixed Income Conversation Corner with Dan Hyman (PIMCO) and Leslie Falconio (UBS CIO)
Oct 2, 2025
Dan Hyman, a Senior Portfolio Manager at PIMCO specializing in fixed income, joins UBS's Leslie Falconio to delve into the intricacies of the mortgage-backed securities market. They discuss the slow normalization of agency MBS and its ties to reinvestment benefits. Hyman shares insights on the Fed's anticipated easing and its impact on mortgage demand. The duo also explores historical mortgage performance during recessions and the current dynamics affecting refinancing behaviors, offering a nuanced view on adding agency MBS to investment strategies.
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Wide Spreads Offer Reinvestment Value
- Mortgages have stayed attractive because spreads remained wide and reinvestment yields are high.
- Dan Hyman argues wide spreads let investors reinvest at richer yields rather than chase spread tightening.
Overweight High-Quality Fixed Income
- Overweight high-quality fixed income to capture 2–3% real yields as Fed easing approaches.
- Dan Hyman recommends being paid to wait in fixed income because it hedges slower growth risks.
Curve Steepening Draws Bank Demand
- Rate cuts and a steepening curve typically bring banks back to buy mortgages.
- Dan Hyman notes banks seek assets that yield above deposit liabilities, favoring MBS when curves steepen.