FNMFM - Credit Risk-Transfer Securities: Finding The Way Forward
By Janaki Rao and Monika Carlson
As fixed-income markets have started to recover following the massive selloff and liquidity crunch in March, credit risk-transfer securities (CRTs)?agency mortgage securities not guaranteed by Fannie Mae (FNMFM) and Freddie Mac (FMCC)?have been slower to do so. Investors are wondering: Where do CRTs go from here?
To answer this question, we believe it’s important to look at the reasons for CRTs’ larger underperformance in March. Initially, the drawdown was driven by concerns about housing-market fundamentals, as investors feared that unemployment caused by the economic lockdown to slow the spread