At Extreme Investor Network, we pride ourselves on providing our readers with unique and valuable insights into the world of investing. Today, we are excited to share with you a special tip from UBS on where to find high-quality income at a bargain.
UBS recommends turning to agency mortgage-backed securities for investors looking for a great deal. Leslie Falconio, head of taxable fixed income strategy in UBS Americas’ chief investment office, notes that agency MBS are currently relatively cheap compared to investment-grade corporate bonds. Not only that, but these securities offer current yields around 5.7%, making them an attractive option for income-seeking investors.
Agency MBS are debt obligations backed by the government and issued by agencies such as Fannie Mae, Freddie Mac, and Ginnie Mae. They offer a triple-A asset class with minimal credit risk and a high level of liquidity. In the current economic environment, where a slowdown is expected but a hard landing is not, agency MBS are poised to perform well.
While agency MBS have historically lagged behind other fixed income securities due to their correlation to interest rate volatility, UBS believes that now is the time to take advantage of their relative value. Falconio specifically recommends investing in current-coupon mortgages within this space for optimal returns.
Investors can easily access agency MBS through exchange-traded funds (ETFs) such as the iShares MBS ETF (MBB) and the Janus Henderson Mortgage-Backed Securities ETF (JMBS). These ETFs offer low expense ratios and attractive yields, providing a convenient way for investors to diversify their portfolios.
Looking ahead, UBS anticipates that interest rate volatility will decrease over the course of the year, making agency MBS an even more appealing investment option. As the market becomes more comfortable with the possibility of the Fed cutting rates, these securities are expected to benefit from increased inflows.
In conclusion, UBS believes that agency MBS are a smart choice for investors seeking high-quality income at a discounted price. With the potential for lower interest rates and a more favorable economic outlook, now may be the perfect time to consider adding agency MBS to your investment portfolio. Stay tuned to Extreme Investor Network for more exclusive insights and tips on investing in today’s market.
