When leading central banks stop playing the monetary policy tunes that many financial markets have been dancing to over the past decade – that jaunty ditty called quantitative easing, or QE as it is known by its abbreviation – the financial assets that were the winners under QE look set to become the losers, but there is one asset class that should continue to hum along nicely: US mortgage-backed securities (MBS), as fund manager John Carey explains.
With US economic growth and inflation now well entrenched in recovery territory, the Fed has called quits on QE, begun raising its policy rate gradually and is in the process of equally gradually offloading many of the assets it accumulated on its books under the QE programme.
That raises the question: what is next for MBS and what could be reasons for investors to hold on to, or buy, agency MBS?
