To US Financial Professionals servicing non-US persons

Global Perspectives: Mortgage-backed securities – has the baby gone out with the bathwater?

In the latest episode of our Global Perspectives podcast series, Portfolio Manager Nick Childs and Securitized Products Analyst Tom Polus discuss the reasons why they believe mortgage-backed securities have been sold off disproportionately, and if that might be a good thing going forward.

Key takeaways

  • Concerns around excess supply – coupled with elevated interest rate volatility – have resulted in mortgage-backed securities (MBS) experiencing a disproportionate sell-off in 2022, relative to US Treasuries.
  • In the event of an economic downturn, we believe MBS are well positioned due to their countercyclicality – they have no additional credit risk over US Treasuries – and we believe the US Federal Reserve is more likely to pause or stop quantitative tightening as economic conditions worsen, which would alleviate current supply concerns.
  • Following the sharp move up in mortgage rates, the makeup of the MBS Index differs greatly from the present mortgage market, and we therefore believe that maintaining an active approach in MBS is important, as disparities exist between various subsets of the investment universe.

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Adam Hetts, CFA

Adam Hetts, CFA

Global Head of Portfolio Construction and Strategy



Thomas Polus, CFA

Thomas Polus, CFA

Fixed Income Trader


Aug 8, 2022

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.

 

Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

 

The information in this article does not qualify as an investment recommendation.

 

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Adam Hetts, CFA

Adam Hetts, CFA

Global Head of Portfolio Construction and Strategy



Thomas Polus, CFA

Thomas Polus, CFA

Fixed Income Trader


Aug 8, 2022