STOCKS | Stifel Says Fed Hike Expectations Create Favorable MBS Environment

Stifel said rising odds of a Federal Reserve rate hike, combined with a mild bear-flattening in U.S. Treasury yield-curve pricing, create a favorable environment for mortgage-backed securities, or MBS, by slowing prepayment speeds. According to Sina Finance, strategist Kevin Carvin wrote in a Wednesday research note that although spreads have narrowed year to date, MBS still offer attractive yield and carry advantages versus U.S. Treasuries. The narrowing in spreads across 30-year coupons was attributed to lower premium risk, limited net supply, and slower prepayment speeds.