MBS and ABS participants gathered in Las Vegas this week, discussing volatility and weak demand from investors. The consensus? Buyers will remain cautious until getting a better handle on the Fed’s actions.

FHFA is working on an alternative to the single counterparty fee, triggered by a controversial provision in the new capital rule, that requires the GSEs to hold capital against one another as counterparties.

Angel Oak Director Robert McDonough noted the difficulties in pricing climate risks into securities. However, once investors can more actively analyze risks, residential MBS loan pools are likely to change, he said.

Lower origination levels continue to impact agency MBS trading volume. Meanwhile, credit quality fears are starting to gain traction in some quarters of the industry.

S&P Global said its base-case assessment places the risk of recession over the next 12 months at 40%, “with the risk greater in 2023.”

Spreads on various types of residential MBS are wider than they were during the early days of the pandemic, suggesting that the assets aren’t particularly attractive to investors. However, that isn’t necessarily true.

The Federal Reserve’s runoff of Treasuries and agency MBS remains far below expectations.

Freddie recorded the biggest decline in the agency market, while Ginnie dodged the worst of the downturn. Agency multifamily MBS issuance was up, however, as was non-mortgage ABS production. (Includes three data charts.)

When the financial outlook weakens, equity prices suffer and debt prices soon follow. Mortgage REITs are no exception. But overall, the cohort is holding up better than nonbank lender/servicers.

Industry groups argue that assessing fees on commingled collateral could undermine market confidence in the UMBS.