State of the Agency MBS Union:

A random walk of valuable insights into the world of Fannie/Freddie/Ginnie mortgage back securities & where things could head in the next 12-18 months

Tight Spreads Everywhere:

Almost every securitized product in the US, particularly in liquid and well-known spaces, is tight, with spreads compressing significantly over the past year as markets shift to a risk-on sentiment. You can see just how tight they are below.

On a 5-year trailing percentile rank, the cheapest opportunities are found in FRESB 5-Year Hybrid ARMs (Govt. G-teed), these are fixed for 5 years and are generally backed by multifamily properties with five or more units; Fannie/Freddie 30-Year Pass-Throughs (Govt. G-teed), which are 8 year duration with interest rate risk in rates up and call risk in rates down; and 7-Year Fannie DUS bonds (Govt. G-teed), multifamily mortgage-backed securities that have some prepayment risk due to single loan deals. And even though these are wide historically, they’re still not jump up and down cheap nominally.