Demand for MBS/ABS remains high, helped by interest rate trends. But President Trump is a wildcard, prompting some caution among investors.

While the fair value of bank MBS declined in the fourth quarter, the industry reported a slight gain on an amortized-cost basis. Bank of America led the ranking of bank MBS investors, though its portfolio fell $27 billion. (Includes two data tables.)

The leaders of the big REITs that invest in agency MBS want a federal backstop for GSE MBS to continue.

Actions by the Federal Reserve are helping to reduce volatility in the agency MBS market. Investors are comfortable with current conditions, with supply and demand seen as being in balance.

Obstacles like how to deal with the implicit guarantee and excessively high capital requirements make it unlikely that the GSEs will exit conservatorship under Trump, though the chances are higher than before his election.

The debate over how to end the conservatorships of Fannie Mae and Freddie Mac hinges on whether rating services would downgrade the GSEs if they exit without an explicit government guarantee.

The settlement includes $19.4 million in disgorgement of profits the SEC said BMO generated between December 2020 and May 2023 through misleading sales of agency CMOs.

TRACE trade data on non-agency CMOs isn’t released until 18 months after the transaction, leaving customers at the mercy of dealers when it comes to pricing information.

Critics argue that, if Fannie Mae and Freddie Mac are released from conservatorship without an explicit government guarantee, MBS investors will demand wider spreads to cover the added credit risk.

Analysts say many of the economic forces that have acted as headwinds for the agency MBS market since 2022 are now poised to become tailwinds.