Four Key Charts for Residential Mortgage-Backed Securities

Christopher Joye

Coolabah Capital

I've been asked by a few clients why we exited our circa $250m position in AAA rated RMBS, which was a modest ~10% portfolio exposure that had performed brilliantly over 2017. The four charts below summarise why: house prices are falling; default rates are rising; supply of RMBS has surged while spreads have fallen; and, finally, borrower prepayments are declining, which is blowing-out the weighted average life of these bonds and adversely affecting prices.

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Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs $7 billion with a team of 33 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...

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