Mortgage-backed securities market waits for interest rate clouds to lift

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Historically expensive home loans have hit issuance, while demand from key buyers has slumped

At ABS East, a big gathering for the securitisation markets in Miami last month, both the mood and the weather were better than expected, attendees said. But in the beleaguered subsector of mortgage-backed securities , seeing just a glimmer of sunshine is about as good as it has got this year. And the forecast seems unlikely to improve any time soon. With $12.

Currently, for top-rated MBS backed by the US government, they stand at almost 1.8 percentage points, according to Bloomberg data. That’s below a peak of 1.9 percentage points in May, but well up from 0.6 percentage points in January 2022. For these spreads to fall, MBS prices would have to rise more rapidly than Treasury prices — which would then encourage fresh investment. Supply, at least, is likely to remain relatively tight, offering some support to MBS prices.

 

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