Investors that once focused on lower tranches of non-agency MBS are shifting up in credit, seeing just as strong returns from AAA-rated tranches with fewer risks. Investors in agency MBS are also changing strategies as interest rates rise.

Falling market values for Fannie/Freddie pass-throughs played a big part in the decline in bank investment in residential MBS during the second quarter. Holdings of Ginnie MBS and non-agency securities were up. (Includes two data charts.)

FINRA and the MSRB plan to cut the reporting time for TRACE-eligible trades from 15 minutes to just one.

Changes to Form FR-2004 help distinguish between the specified pool and to-be-announced positions of primary dealers.

The Federal Reserve giveth and taketh away in the agency MBS market. And now that the central bank’s investment activity is significantly curtailed, investors are seeing some opportunities in the sector.

With FHA loan performance relatively strong and the spike in interest rates this year, early buyout activity from Ginnie MBS is limited. Overall, removals are slowing thanks to elevated interest rates. (Includes data chart.)

The mismatch between falling interest income at the Fed and growing interest expense is projected to result in deferred assets of between $60 billion and $150 billion.

The two largest REITs in terms of holdings of agency MBS noted extreme volatility in the second quarter while also suggesting that market dynamics are set to improve.

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.

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