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Morgan Stanley MBS analysts urged that.......>

US MBS
US MBS: Morgan Stanley MBS analysts urged that "short FNCL 3s vs. (US) rates is
a trade that gets short mortgage spreads at near post-crisis tights in nominal
levels, while inherently getting long volatility near all-time lows. The
technicals for a mortgage short are strong as already high Agency MBS supply
meets Fed balance sheet unwind." (MBS taper will start with 3pm ET today
announcement on MBS runoff details.)
- They "recommend shorting Agency MBS vs. rates, getting short the nominal
spread, which will effectively allow investors to get long volatility. This
trade is neutral duration, long vol, roughly curve-neutral, and negative carry.
We recommend a 3-month holding period and are looking for 10-15bp of spread
widening."

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