Valuation skew

Valuation skew

Category: RMBS

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GN/FN relative value opportunities weighed

Policymaker intervention continues to skew US agency RMBS values. Given the difficulty of quantifying macro themes in the sector, analysing prepayment performance is one way of identifying relative value in GN/FN swaps.

Ginnie Mae and Fannie Mae pass-throughs have historically enjoyed a close valuation relationship, according to FTN Financial Capital Markets svp Walt Schmidt, given that the former are fully guaranteed by the US government and the latter have been supported by the US government - although no legal guarantee exists.

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