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VMBS: Hold Rating Reflects Adequate Carry With A Negative Convexity Tax
Vanguard Mortgage-Backed Securities ETF is rated Hold due to inferior risk-adjusted returns versus alternatives like AAA CLOs, despite its ultra-low 0.03% expense ratio. Agency MBS benefits from improved macro tailwinds—ending of quantitative tightening, GSE purchases, and returning bank demand—but these positives are largely priced in. VMBS's negative convexity and 4.15% yield are not sufficiently compensated versus floating-rate CLO ETFs, which offer higher yields, near-zero duration, and positive convexity.
Mortgage-Backed Securities ETF (VMBS) Touches New 52-Week High
For investors seeking momentum, the Vanguard Mortgage-Backed Securities ETF VMBS is probably on the radar now. The fund just hit a 52-week high and is up 6% from its 52-week low price of $44.85 per share.
This 5% Monthly Payer Beats Vanguard's VMBS With Higher Income For Retirees
The Janus Henderson Mortgage-Backed Securities ETF ( NYSE:JMBS ) offers retirees a monthly income stream with a 5.04% yield, positioning itself as a compelling alternative to traditional bond funds.
Vanguard Mortgage-Backed Securities Fund Investors
| Name | Quantity | Cost | Value | Profit ($) | Gain (%) |
|---|---|---|---|---|---|
| TJD Thomas John Drogan PR Inc.IPAL SECURITIES Inc. | 106,787 | $4.97M | $4.97M | $765.03 | 0.02% |
| DI David Izzi Brown, LISLE/CUMMINGS Inc. | 55 | $2,480 | $2,557.77 | $77.77 | 3.14% |
| MSH Michelle S. Hickox FIRST FINANCIAL BANKSHARES Inc. | 939,648 | $43.66M | $43.7M | $38,301.31 | 0.09% |
| CE Curtis Ellergodt Rothschild Investment LLC | 81 | $3,677.48 | $3,766.9 | $89.42 | 2.43% |
| TM Tom McDonald Richards, MERRILL & PETERSON Inc. | 47 | $2,212.86 | $2,185.5 | -$27.36 | -1.24% |
Vanguard Mortgage-Backed Securities Fund (VMBS) FAQ
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Vanguard Mortgage-Backed Securities Fund Profile
| NASDAQ (NMS) Exchange | US Country |
Overview
The fund is strategically positioned within the investment landscape to offer investors exposure to U.S. agency mortgage-backed securities (MBS). By adhering to an indexing investment approach, the fund's primary objective is to closely mirror the performance of the Bloomberg U.S. MBS Float Adjusted Index. This benchmark index is comprehensive, encompassing U.S. agency mortgage-backed pass-through securities that are issued by the Government National Mortgage Association (GNMA), the Federal National Mortgage Association (FNMA), and the Federal Home Loan Mortgage Corporation (FHLMC).
Products and Services
- Indexing Investment Approach
- Sampling Process Investments
- Mortgage-Backed Securities (MBS) Investment
The fund utilizes an indexing strategy aimed at tracking the Bloomberg U.S. MBS Float Adjusted Index. This approach is designed for investors seeking exposure to the U.S. mortgage market, specifically focusing on securities that have a minimum pool aggregate of $1 billion currently outstanding and a weighted average maturity of at least 1 year.
In achieving its investment objective, the fund employs a sampling process to select investments. This method involves choosing a subset of bonds that collectively are intended to replicate the financial characteristics and performance of the index. As a result, it facilitates efficient fund management while striving to match the benchmark's return.
Consistent with its investment strategy, at least 80% of the fund's assets are directly invested in bonds that are included in the Bloomberg U.S. MBS Float Adjusted Index. This includes U.S. agency mortgage-backed pass-through securities, which are pivotal for investors aiming to diversify their portfolio while tapping into the residential mortgage market.
