RMBS Researchers Forecast Modest Increase In Volume Next Year
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RMBS Researchers Forecast Modest Increase In Volume Next Year

Researchers believe issuance of non-agency residential mortgage backed securities will increase modestly next year.

Researchers believe issuance of non-agency residential mortgage backed securities will increase modestly next year.

“Aggregate new issuance in prime jumbo, GSE risk-sharing, and single-family rental deals should be between $26 billion and $33 billion in 2013,” said Deutsche Bank analysts led by Steven Abrahams.

Bank of America projects $22 billion in non-agency issuance, with $12 billion in jumbo deals, $6 billion of risk-sharing deals from the government sponsored enterprises, and $4 billion from REO-to-rental transactions. Non-performing and reperforming MBS could add up to $15 billion more.

Total year-ahead figures may be in the $15-$20 billion range next year for non-agency MBS backed by new originations, according to Wells Fargo analyst Mark Fontanilla. That compares to $12.5 billion year-to-date, according to a report produced under research head Greg Reiter, a senior analyst at the bank.

Morgan Stanley analysts believe the outlook is set up for “alpha hunters,” as they described it in their outlook (SI, 12/3). They expect $15-$25 billion next year. “Our investment thesis for non-agency RMBS in 2014 is that it is set up for alpha hunters, driven by substantial variability in collateral performance and sensitivity to positive convexity potential across the non-agency universe. This will translate into substantial variation in returns, making bond selection more critical than it has been,” analysts James Egan, Vishwanath Tirupattur and Jose Cambronero said.

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