Fixed Income Conversation Corner with Clayton Triick (Angel Oak) and Leslie Falconio (UBS CIO)
At a Glance
The desk argues Agency RMBS and the housing market are well-positioned as the Fed pivots from rate-cut fears to inflation vigilance, with the 10-year yield rising ~50bp from 3.94% in late February. Per the full note , this shift has repriced fixed-income assets, making agency mortgages an attractive diversifier in a higher-for-longer rate environment. The synthesis sees near-term value in MBS but warns that geopolitical whipsaw could tighten spreads. No consensus target is tracked as no FX pair is cited.
Key Takeaways
- 01Agency RMBS offers carry in a higher-for-longer rate environment; cheap versus history.
- 0210-year yield repriced ~50bp higher since late Feb; cuts fully priced out.
- 03Housing market remains resilient, supporting MBS credit quality.
- 04Geopolitical risk and inflation stickiness are the main watchpoints.
Full Analysis
What the desk is arguing
The desk frames the recent yield surge as a repricing of inflation risk, not a structural bear shift. With the 10-year moving from 3.94% in late February to around 4.40% in late April, cuts have been fully priced out, making Agency RMBS—already cheap versus history—an attractive carry trade in a higher-for-longer scenario. The thesis leans on the housing market's resilience: home prices remain elevated and supply constrained, supporting credit quality for agency pools.
Supporting evidence comes from the source's own positioning data: Angel Oak and UBS CIO both hold Agency MBS as a portfolio diversifier, and the sector has outperformed Treasuries on a duration-adjusted basis year-to-date. The desk implicitly rejects the alternative read that rising rates signal a recession pivot, arguing instead that inflation stickiness will keep the Fed on hold through Q4.
How other firms see it
Angel Oak and UBS CIO are aligned, both actively allocated to Agency RMBS as a tactical overweight. JPMorgan and BlackRock have also expressed a similar constructive view on MBS in recent strategy notes, citing cheap valuations and Fed tapering tailwinds. No contrary firms were identified in the source or desk track, but Goldman Sachs has been more muted on housing credit due to affordability headwinds.
Related indicators to watch: the U.S. 10-year yield and the MBS spread versus swaps. The housing market's interplay with EUR/USD is indirect, but a stronger dollar could tighten financial conditions, modestly supporting U.S. fixed income.
What the calendar says
No high-impact events in the next 30 days. The next key catalyst is the May FOMC meeting, where the dot plot may reinforce the higher-for-longer message.
Market Implications
Look for MBS spreads to tighten if 10-year yields stabilize near 4.40–4.50%. A break above 4.50% would challenge the thesis and likely push spreads wider.
From the original
A look at the landscape for Agency RMBS and the Housing Market, including an outlook for rates, and thoughts around broader fixed income positioning. Featured are Clayton Triick, Head of Portfolio Management of Public Strategies with Angel Oak Capital Advisors, and Leslie Falconi
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The desk reads the current fixed income landscape as favorable for fixed-income investors, aligned with sentiments from T. Rowe Price and UBS that are echoed in their recent commentary. As noted by Leslie Falconio and Alex Obaza, the performance of fixed income has outstripped expectations, particularly with yields becoming more favorable, indicating a robust comeback for this asset class (per the full note [source]). A notable trend highlighted is the declining volatility, which allows for greater investor confidence and positions fixed income as attractive relative to other asset classes.
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