New Mortgage-Backed Bonds Offer Quality, Show Strength in Housing Market

The demand for housing is strengthening nationwide and that’s creating opportunities in the non-agency mortgage-backed bond market, said Gary Singleterry, portfolio manager GAM Unconstrained Bond Strategy. 'A lot of the mortgage-backed securities market offers very attractive spreads over Treasuries compared to say the corporate bond market and we do have an improving housing market,' said Singleterry. 'In the non-agency area you can find pretty good value if you know what you are doing.' Singleterry said the national housing market has recovered fairly well since the crisis with prices back to their long-term trend line. Regionally, however, he said big differences still remain with many markets back to their pre-crisis highs, while some are not. Singleterry said he expects house prices to increase along with inflation going forward at about 2% to 3% per year. Unlike housing, however, the mortgage-backed securities (MBS) market has not fully recovered, creating buying opportunities in Singleterry’s view.