Buy: Mortgage Backed Securities

: When interest rates fall, homeowners often refinance, causing principal to be returned to the investor earlier than expected. This often happens when reinvestment opportunities have lower rates.

Professional managers select a portfolio of pass-through securities. Widely available via brokerage accounts. Buying individual MBS (by CUSIP) through a broker. Harder for retail; high minimums often apply. Major Types of MBS

: They provide exposure to the housing market and typically have a low correlation with corporate bonds or stocks. Critical Risks to Consider buy mortgage backed securities

: Complex structures divided into "tranches" with varying risk levels, maturities, and payment priorities. 2026 Market Outlook

: Agency MBS often offer more attractive yields than U.S. government bonds while maintaining high credit quality. : When interest rates fall, homeowners often refinance,

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Funds like the iShares MBS ETF (MBB) provide diversified exposure to thousands of mortgages. Best for retail investors. Widely available via brokerage accounts

As of early 2026, experts suggest that agency MBS remain a high-quality "core" bond holding. With yields in the ~5% range and 10-year Treasury yields near 4%, mortgage rates are expected to stay high enough to limit refinancing activity, thereby reducing prepayment risk for investors.