Mortgage and Structured Products Trader: Optical Value vs. Real Value

This report analyzes relative value across US mortgage and structured products, highlighting capacity constraints in GSE portfolios and a K-shaped trend in consumer delinquencies.

Key Takeaways

• 1.The Agency MBS basis is expected to widen due to PSPA portfolio caps limiting GSE purchase capacity to $155 billion, which is below the $200 billion purchase program target.
• 2.Conventional agency CMBS (Freddie K) provide better relative value compared to agency MBS, even though nominal spreads appear tight.
• 3.Consumer delinquency data reveals a 'K-shaped' bifurcation, where mortgage and home equity products remain stable while credit cards and student loans show mounting stress.

Table of Contents

• Agency MBS: Basis likely to widen longer-term absent PSPA cap revision
• Prime Jumbo: Paying for retail share and location
• ABS: Looking beyond the headlines in consumer lending delinquencies
• Cross-Asset Valuations
• Agency MBS metrics
• MBS vs. corporates
• MBS issuance
• CMBS spreads and issuance volumes
• Consumer ABS - spreads and collateral performance

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