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Alternative Market Briefing

Seizing the opportunity in agency MBS
Thursday, December 19, 2024

According to an article by Tracy Chen, portfolio manager at specialist investment manager Brandywine Global, agency mortgage-backed securities have presented a compelling valuation anomaly for the past few years. In 2025, several dynamics should continue to support the opportunity in this asset class.

Mortgage-backed securities (MBS) are investments like bonds. Each MBS consists of a bundle of home loans and other real estate debt bought from the banks that issued them. Agency MBS are asset-backed securities secured by a mortgage or collection of mortgages issued by federal agencies like Fannie Mae, Freddie Mac and Ginnie Mae.

Since late 2022, agency mortgage-backed securities (MBS) have presented a compelling investment opportunity. The MBS market experienced significant spread widening due to the Federal Reserve's quantitative tightening and the regional banking crisis, creating an attractive investment landscape.

Despite challenging market conditions, the fundamentals of MBS remained strong. The managers at Brandywine implemented a phased investment strategy, initially targeting production coupon MBS in October 2022 when spreads w......................

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