Combatting the inflation threat
By International Adviser, 5 Jul 18
Investors need to be focusing more attention on the potential for rising rates – both inflation and interest – and the implications for fixed income portfolios as global economic growth conditions continue to improve, says Neuberger Berman’s Jon Jonsson.
We see a strong risk/reward opportunity in credit risk transfers (CRTs).
US mortgage giants Fannie Mae and Freddie Mac started CRT programmes in 2013 and now transfer a substantial amount of the credit risk assumed for loans in certain loan categories to private investors.
Targeted loan categories are single-family fixed-rate mortgages, with loan-to-value ratios (LTVs) greater than 60% and an original term greater than 20 years.
From the beginning of the CRT programmes in 2013 through the end of 2017, Fannie Mae and Freddie Mac transferred a portion of credit risk on approximately $2.1trn (£1.6trn, €1.8trn) in single-family loans through CRT.
While improving US housing market and a recovery in consumer balance sheets takes hold and valuations adjust we look to maintain exposure to the most attractive securities within the sector.
Tags: Inflation | Neuberger Berman
