- Fixed Income Portfolio Manager
- About Us
- My Account
The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
Now seems an opportune moment to provide an update on the securitized market— a fixed income sector that, in many ways, has been on the front lines of the ongoing turmoil in the US banking sector. However, as discussed below, our view is that not all securitized subsectors are equally vulnerable in this environment.
US Treasury yields have fallen, while credit spreads and global market volatility have risen, amid the recent challenges faced by a growing number of banks in both the US and Europe. As a result, March has been a tough month for many market sectors as of this writing, and the securitized asset space has been no exception.
Agency mortgage-backed securities (MBS) have been directly impacted by the crisis, making them one of this month’s worst risk-adjusted performers within the securitized space. Many smaller, regional banks have significant exposure to agency MBS and began to sell such securities as they experienced swift deposit outflows, which they feared would only accelerate.
The Bank Term Funding Program (BTFP) announced by the US Federal Reserve (Fed), which offers loans pledged to agency MBS or Treasuries at face value, has helped ease some of the concerns around MBS sales, allowing their spreads to partially retrace some of the recent widening. However, the uncertainty around this subsector remains elevated, even after preliminary government steps to stabilize affected institutions in both the US and Europe.
In contrast to agency MBS, securitized credit (non-agency RMBS, CMBS, CLOs, and ABS) constitutes a smaller share of most small regional banks’ portfolios, but these assets have not been immune from spread widening on the back of deteriorating liquidity conditions and a worsening macroeconomic backdrop this month. Moreover, the likelihood of increased regulatory capital requirements being imposed on regional banks is apt to adversely impact securitized credit broadly.
Yet it’s important to note that each securitized subsector carries different (and varying degrees of) risks from the current banking situation:
Financials amid rising dispersionContinue reading
US regional banking sector updateContinue reading
State of the credit markets: Does cash rule everything around us?Continue reading
FX outlook: Is USD exceptionalism withering away with the Fed hiking cycle nearing an end?Continue reading
Private credit in a new regimeContinue reading
Financials amid rising dispersion
We explore why we believe dispersion across stocks, sectors, and geographies is supporting numerous secular themes in long/short investing in financials.
US regional banking sector update
We explore how banking regulation and legislation could impact US regional banks, including highlighting the potential for M&A activity and for dispersion to drive long/short opportunities.
State of the credit markets: Does cash rule everything around us?
Fixed Income Portfolio Manager Brij Khurana outlines the state of the credit market today, compares historical periods of quantitative easing, and warns credit investors of cash scarcity in the near future.
FX outlook: Is USD exceptionalism withering away with the Fed hiking cycle nearing an end?
Discover the status of the USD today, learn where the greenback may be headed going forward, and understand why.
Private credit in a new regime
We explore how a shifting macro backdrop, ongoing banking crisis, and evolving competitive dynamics may create opportunities across private credit markets.
Credit market outlook: Expect greater opportunities in back half of 2023
Against a backdrop of elevated recession risks and banking-sector stress, Fixed Income Portfolio Manager Rob Burn identifies relative-value sector opportunities in the credit market.
Inflation loosens its grip, but bank turmoil could put the squeeze on US growth
US Macro Strategist Juhi Dhawan weighs the benefits of disinflation for consumers and companies against the risks of a credit crunch brought on by the recent bank crisis.
Global high yield: Attractive entry points could soon emerge
Fixed Income Portfolio Manager Konstantin Leidman shares his outlook for high-yield fixed income for the rest of this year and beyond.
Did the Fed just make a policy error?
Did the Fed just make a policy error? All things considered, Fixed Income Portfolio Manager Jeremy Forster thinks the answer is yes. Learn why and what the implications could be.
How do bank failures impact fintech?
Global Industry Analyst Matt Ross analyzes the ways in which recent US bank failures could impact the fintech sector in public and private markets.
Three macro assumptions that could be just plain wrong
Fixed Income Portfolio Manager Brij Khurana offers his non-consensus take on three entrenched, but potentially flawed, beliefs in today's market environment.