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RMBS Researchers Forecast Modest Increase In Volume Next Year

31 Dec 2013

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.

31 Dec 2013