Mortgage Bonds Look Cheap to Fund Managers as Fed Pauses
- Mortgage bonds outperform this month, and may gain more
- Spreads are still wide compared with sectors like corporates
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Asset managers like American Century Investments and Saba Capital Management are loading up on mortgage bonds to profit as the Federal Reserve increasingly appears to be close to ending its tightening cycle.
Bonds have broadly surged in November after the latest US consumer price index report showed essentially no changes in overall prices from the prior month, implying the Fed might be close to getting inflation under control. For weeks, investors had feared that rates would be higher for longer than expected, but now debt markets are boosting wagers on rate cuts next year.