Mortgage Bond Weakness Threatens the U.S. Corporate Debt Market
- Investors are seen selling corporates and buying MBS
- ‘Bigger fallout in credit could be to come,’ Barclays says
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The U.S. corporate bond market is relatively calm so far about the Federal Reserve’s plans to start tightening the money supply in March, but pain for the debt could be coming from an unlikely source: home loans.
Most of those mortgages get bundled into bonds backed by U.S. government agencies, securities that have been weakening since November as money managers prepare for the Fed to slow down its purchases of them. The central bank is the biggest single buyer of mortgage-backed securities now.