Why historical RMBS defaults rates are among the lowest in fixed income

September's disastrous Salzburg summit brought the risk of a 'no-deal' Brexit into sharper relief.

Weakness in sterling and concern about sterling-denominated assets, including UK residential mortgage-backed securities (RMBS), reflects a growing unease among investors about the Brexit outcome. While a compromise deal and a 'soft' Brexit remains our base case, it is reasonable to expect a period of heightened volatility ahead. We have consistently held a meaningful exposure to UK RMBS, and regardless of the ultimate outcome of the negotiations, we are highly likely to maintain this stance. First, the UK mortgage market has consistently been a top performer. Its worst default rate...