Updated
Updated · ETF Trends · Jul 21
BNP Paribas Backs Mortgage-Backed Securities as 30-Year Rates Hold at 6.61%
Updated
Updated · ETF Trends · Jul 21

BNP Paribas Backs Mortgage-Backed Securities as 30-Year Rates Hold at 6.61%

2 articles · Updated · ETF Trends · Jul 21

Summary

  • Agency mortgage-backed securities remain fundamentally strong, BNP Paribas said, arguing elevated mortgage rates are supporting the sector rather than undermining it.
  • At 6.61%, the national average 30-year fixed mortgage rate is curbing refinancing, housing turnover and new originations, which keeps net MBS supply low and cash flows more predictable.
  • An 11% drop in June prepayment speeds for 30-year FNMA aggregates reinforced that view, with BNP saying refinancing slowed more than expected in higher-coupon pools.
  • WisdomTree’s actively managed MTGP ETF reflects that appeal with a 4.31% 30-day SEC yield, while BNP said narrowing spreads still leave medium-term returns supported mainly by carry.

Insights

If the Fed pivots to rate cuts, could the 'robust opportunity' in mortgage securities suddenly collapse for investors?
Is the safety of mortgage bonds an illusion masking a multi-trillion dollar taxpayer liability from the 2008 crisis?
Are investors' gains built on a 'lock-in effect' trapping homeowners, and what's the hidden economic cost?