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New Way to Short Home Loans May Give a Boost to Mortgage-Bond Market

  • Investors divided on whether timing is right for new product
  • Derivatives could reference an index similar to pre-crisis ABX
Updated on

A new product that would allow investors to short U.S. home loans may kickstart the growth of an infant mortgage-bond market if some money managers have their way.

Derivatives on a pricing index that tracks mortgage risk sold by Fannie Mae and Freddie Mac would help banks support the underlying notes, Roman Shimonov, a director at Annaly Capital Management -- one of the largest mortgage-focused real estate investment trusts -- said at an industry conference in New York on Monday.