Even with today’s low yields, credit barbell strategies can still meet their objectives of downside protection, upside participation and efficient income.
As fixed-income markets have started to recover following the massive selloff and liquidity crunch in March, credit risk-transfer securities (CRTs)―agency mortgage securities not guaranteed by Fannie Mae and Freddie Mac―have been slower to do so. Investors are wondering: Where do CRTs go from here?
Trade tensions—and the volatility they bring—are forcing investors to think about new ways to generate low-volatility income. A mortgage income strategy that balances high-quality securities with historically high-returning ones can help.
The median price of a US single-family home has risen just over 40% since the last housing-market crash. While newspaper headlines may put readers on edge, our analysis indicates a gradual slowdown, not a bursting bubble—in most regions.
Bond investors get anxious when rates rise suddenly, as Treasury yields have recently. But if your investment horizon is longer than a few months, rising rates are nothing to be afraid of.
Investors seeking floating interest-rate exposure and high yields are increasingly turning to credit risk–transfer securities (CRTs), a fairly new type of mortgage-backed bond. But could US tax-code changes hurt the housing market and, by extension, CRTs? We don’t think so.