Current conditions in the MBS market have created an opportunity for depositories to take advantage of their low funding costs to pick up investment income.
– Excerpt from the Carry Opportunity: Strategy for Banks and Depositories Whitepaper
In this “Carry Opportunity: Strategy for Banks and Depositories” whitepaper by Bill Berliner, Director of Analytics at Mortgage Capital Trading (MCT), Mr. Berliner explores the current conditions in the MBS market that have created an opportunity for depositories to take advantage of their low funding costs to pick up investment income.
Mr. Berliner utilizes illustrative charts to discuss the context and impact of current trends in the MBS market such as lowered hedging costs for mortgage pipelines and the decline of “dollar roll” prices. Ira Brownstein, Senior Vice President at WSFS Mortgage, shares his experience implementing this carry strategy for a positive gross monthly carry of ~30 basis points.
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About The Author – Bill Berliner
Mr. Berliner has more than 30 years of experience in the mortgage and MBS markets as an analyst and trader. He has extensive working knowledge of mortgage and MBS trading, hedging, structuring, valuation, and operations. Prior to joining MCT, he worked in risk management and systems development with Thomson Reuters, Kinecta Federal Credit Union, and Manhattan Capital Markets, and also owned his own consulting practice. He served as the head of Trade Strategies for Countrywide Securities until 2008, and also held senior positions with Nikko Securities and Bear Stearns. He has written extensively on the markets, co-authoring two editions of a textbook on MBS with Frank Fabozzi and Anand Bhattacharya, and has co-authored almost 20 book chapters and published articles.
Mr. Berliner holds BA and MBA degrees from Rutgers University. He is an active member of the CFA Society of Los Angeles, and is the society’s resident expert on MBS.
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