The securitized corner of the fixed income market, or those bonds backed by underlying assets, is massive. But the investment-grade landscape of asset-backed bonds is largely dominated by residential mortgage-backed securities (MBS).
Some fixed income experts believe amid a recent surge in volatility in the bond market, now's the time for investors to consider asset-backed securities. These include mortgage-backed securities.
Last month, the Federal Housing Finance Agency and the Treasury Department put out a press release. It stoked speculation that government sponsored entities (GSEs) Fannie Mae and Freddie Mac could eventually face privatization.
By Kevin Flanagan Key Takeaways Investors using a barbell approach in fixed income can potentially enhance returns by adding securitized assets, such as the WisdomTree Mortgage Plus Bond Fund (MTGP), as a supplementary “plus” component.
The Fed might follow its September interest rate cuts with similar moves well into 2025. So some market participants are reassessing opportunities in bonds.
Last week, the Federal Reserve delivered its widely awaited interest rate cut, paring rates by 50 basis points. That potentially signaled the central bank is on track to lower borrowing costs by 150 bps by Q2 2025.
The fixed income landscape is currently tricky for advisors and investors. There's little clarity as to exactly when the Federal Reserve will lower interest rates — the hope is September.