Some big investors are buying up bonds tied to subprime mortgages and other home loans made prior to the 2008 recession
Some big investors are buying up bonds tied to non-prime mortgages and other home loans made prior to the 2008 recession.
Mortgage-backed securities gained 6.9% this year, according to a report by real-estate publication The Real Deal – and companies like Pacific Investment Management and Goldman Sachs Asset Management are even buying bonds tied to subprime mortgages made prior to 2008.
Mortgage bonds took a nosedive after 2008, with investors moving to corporate debt they considered safer. Non-agency mortgage-backed securities plummeted from about $2.8 trillion in 2007 to about $800 billion by the middle of this year, The Real Deal reported.
But with the housing market coming back, mortgage bonds are looking like a sound investment again – even subprime ones.
“Housing has got legs,” Mark Kiesel, chief investment officer of global credit at Pacific Investment Management, told Bloomberg. “It’s the sector we probably have the highest conviction on.”
If housing prices continue to go up, they’ll push non-agency mortgage bonds up with them, Kiesel said. And even if housing prices go back, Kiesel said he believed the securities would still deliver a positive return, The Real Deal reported.
