Investors looking for high-quality income, as well as a bargain, should turn to agency mortgage-backed securities, according to UBS. The bank thinks the securitized products are relatively cheap compared to investment-grade corporate bonds, said Leslie Falconio, head of taxable fixed income strategy in UBS Americas' chief investment office. They also have current yields around 5.7%, she told CNBC in an interview Friday.
"The tailwind we saw in 2023 that allowed high-yield and investment-grade corporate credit to do well did not spill over to mortgage credit until starting this year," Falconio said. "They are cheap on a relative value basis." She specifically likes current-coupon mortgages. Investors can play the space by using exchange-traded funds. The iShares MBS ETF has a net expense ratio of 0.04% and a 30-day SEC yield of 3.54%.
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