Valeur Group, a leading independent firm specializing in asset management, investment advisory, risk management, trading, and real estate solutions, has recently published an insightful article delving into the subject of Agency MBS, a term commonly employed within the investment sphere. As explained by Valeur Group, the acronym MBS signifies Mortgage-Backed Securities, which stand for bonds supported by a portfolio of mortgage loans. Generally, these loans are secured by property owners to finance the purchase of houses or apartments. When these property owners meet their monthly mortgage commitments, a portion of those payments is designated for the Mortgage-Backed Security, encompassing both interest and principal repayment. What makes Agency Mortgage-Backed Securities appealing? There are numerous factors contributing to this. Agency MBS offer investors a consistent and relatively predictable income stream due to property owners being motivated to make timely mortgage payments to safeguard their homes. Another factor is associated with the term “Agency” in Agency MBS, signifying that these instruments are typically backed by government entities. Given the expectation that the government can intervene to support these agencies in times of credit challenges, this level of support instills investors with stronger sense of confidence.
Another compelling reason is the diversification provided by Agency MBS, which have portfolios consisting of multiple mortgages. This diversification serves to spread risk, minimizing the adverse effects of any missed payments on individual mortgages. Lastly, they are actively traded in financial markets, rendering them relatively straightforward to buy or sell when compared to individual mortgages. Summarizing, Agency MBS offer competitive yields in comparison to investment-grade bonds, assuring potential for enhanced returns. To delve further into the reasons for choosing them, explore Valeur Group’s article on its website.
The full article can be found here: