RT Journal Article
SR Electronic
T1 Benefiting from Extension Risk in the Non-Agency Market
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP 013
OP 029
DO 10.3905/JFI.2010.19.3.013
VO 19
IS 3
A1 Laurie S Goodman
A1 Roger Ashworth
A1 Brian Landy
A1 Ke Yin
YR 2009
UL https://pm-research.com/content/19/3/013.abstract
AB Two trends in the mortgage market are quite apparent: the time spent in the liquidation pipeline is increasing and modification activity is increasing. This article reviews these trends and then focuses on three types of bonds that are attractively priced in the base case and benefit from these trends: 1) front pay tranches of subprime deals, where the deal goes pro rata when the subs are extinguished; 2) selective mezzanine tranches of subprime deals that are trading as credit IOs; and 3) non-agency inverse IOs.TOPICS: MBS and residential mortgage loans, risk management, exchanges/markets/clearinghouses