Halister News

(Bloomberg) -- With markets in late stage of a credit cycle investors should resist urge to reach for yield and use rallies to upgrade portfolio quality via agency MBS purchases instead, MS strategists Adam Richmond and Jay Bacow write in note.

• Credit is early-cycle trade, investors not compensated at late stage of cycle
  • Mortgages present opportunity to improve vol-adjusted returns without conceding too much carry
• IG credit currently “consensus overweight”
  • With corporates seeing greater net issuance than MBS and Fed continuing to remove negative convexity, credit will likely “be more sensitive” to supply/demand technicals over the long run