Non-agency MBS Weekly: Housing: Messy Rates yet no (S)Pain: +0.8% YoY HPA

Research evidence excerpt

Non-agency MBS Weekly: Housing: Messy Rates yet no (S)Pain: +0.8% YoY HPA

Market Overview

Non-Agency Spreads Attractive Among Fixed Income AAA, Cheap Floaters

Issuance for the week was around $5bn, YTD at $143bn. Spreads tightened slightly with

Non-QM and HELOC/CES AAA now at 115bps, and tightened by 10bps across CRT.

Jumbo 2.0 PT at 132bps.

Relative value: Recommended positioning

• Jumbo floaters still provide an attractive value relative to agency, with 6.5 cap at

135, and 6 cap at 165 – a 50bps pickup vs 6 cap Agency

• HELOC/CES AAAs at 115-120 bps, and AA at 140.

• HELOC uncapped floaters at 145-150bps for 2-3 yr duration, with higher value

should rates increase. The screen attractive vs CLO AAAs at 120-125bps for 5yr

duration.

• Non-QM Floaters 6.5cap similarly price at 120bps, with less duration extension risk.

Investors pick up 25bps spread vs Agency 6.5% cap which are at 95bps.

• Non-QM AAA new issue sees opportunities near 125-130bps. Non-QM issuance this

year continues to be at a record-high, leading to some AAA bonds created within

LCF or other profiles to be at times wider than AA.

• The credit curve remains flat with NQM AAA vs BBB spread gap at its tightest level.

We thus recommend staying up in quality.

Exhibit 1: Current AAA RMBS spreads vs other products

We see attractive RMBS opportunities vs other AAA assets, including floaters with wider spreads than CLO

132 135 140

50 105 115 115 116 120

19 0

US MBS IG Bonds AAA AAA CMBS AAA 4Y RPL AAA 2Y Non- AAA 2nd MBS Current AAA 5Y US AAA 5Y Jumbo AAA Jumbo AAA HELOC AAA Jumbo 6

A1 Nonagency QM Lien/HELOC Coupon CLO Nonagency 6.5 cap Float Float cap Float

Nonagency A1 (PT)

AAA

Sources: BofA Global Research, Markit, ICE Data Indices, S&P LCD

BofA GLOBAL RESEARCH

2 Non-agency MBS Weekly | 17 July 2026