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By Nell Mackenzie and Yoruk Bahceli
LONDON, July 4 (Reuters) - Agency mortgage-backed securities are at their cheapest since the 2008 financial crisis and stand out as a top trade, JPMorgan Asset Management's international chief investment officer for fixed income said on Tuesday.
"We have a quarterly meeting with senior investors...and the unanimous top idea coming out of that was agency mortgage backed securities out of the U.S.," Iain Stealey told a Morningstar Investment conference. JPMorgan Asset Management manages $2.5 trillion in assets.
These mortgage loans, originated by banks and sold on to U.S. government entities like Fannie Mae and Freddie Mac come with a government guarantee and are seen as safer investments with a higher credit rating.
"I think of them like cheap U.S. Treasuries," said Stealey, adding that these bonds offered investors an extra 150 basis points of additional yield at the moment compared to US government bonds.
Another reason for the attractive prices, Stealey said, was that after the collapse of Silicon Valley Bank, the firm had to sell down much of its agency mortgage backed securities holdings in the past few weeks.
"The good news is they have sold over 50% of that book," said Stealey.
U.S. agency mortgage-backed securities (MBS) declined in price in May (bond prices fall when yields rise) affected by the wider macro environment, said a recent note by Refinitiv. The FDIC needs to sell more than $60+ billion in agency MBS collateral that it had taken from failed regional banks SVB and Signature, the note said.
Elsewhere, Stealey suggested he'd prefer investing in investment grade bonds more than high yield bonds.
"I like 8% as much as the next person," said Stealey but he countered he was not willing to jump to a lower rated bond for just the two percentage point additional yield more he'd get for a riskier investment.
(Reporting by Nell Mackenzie; editing by Yoruk Bahceli and Philippa Fletcher)
