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Following a fall of 5% in 1Q22, Agency Mortgage Backed Securities posted a quarterly performance that was worse than the taper tantrum of 2013, and more that twice as bad the next worst quarters in 1987 and 1994.
Interestingly, Agency MBS spreads have trended higher higher as the risk of mortgage prepayment has actually trended lower.
Professional Investors are therefore asking whether agency MBS can earn them yields that are relatively attractive for the asset class on a historical basis, but also compared to alternatives within the high quality fixed income space.
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