Schroders and BlackRock back MBS as demand picks up

Sparks and Dickstein expect US Fed to keep holding asset class in short term

US mortgage-backed securities (MBS) are looking attractive at present, with yields near to levels seen in corporate bonds and domestic demand expected to remain strong, managers say. However, interest rate risk has become increasingly important. Being long duration was the correct strategy until Q3, when anticipation of QE2 and double-dip fears drove bond yields down. Since then, any short duration bias has been beneficial as 10-year US treasury yields backed up from 2.38% in early October 2010 to 3.74% in early February 2011. A good year for MBS? Wes Sparks at Schroders and Akiv...