Four Key Charts for Residential Mortgage-Backed Securities

Christopher Joye

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.


Christopher Joye

Christopher Joye is Co-Chief Investment Officer of Coolabah Capital Investments, which is a leading active credit manager that runs over $2.2 billion in short-term fixed-income strategies. He is also a Contributing Editor with The AFR.

Expertise

housing RMBS

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Medium screen shot 2016 01 12 at 2.25.34 pm

James Marlay

That second chart is a cracker

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