If the coronavirus continues to wreak havoc and the federal government doesn’t provide additional stimulus, the performance of residential MBS is expected to take a significant hit.
The credit quality of collateralized loan obligations is expected to further deteriorate in the coming months, even though corporate issuers are stabilizing, according to the rating services.
The key factor for TBA investors is prepayment speeds. A quick scan of the FHFA data show that the conditional prepayment rates for UMBS issued by Fannie and those issued by Freddie have remained comparable since the launch of the single security in June.