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Investors sell $2.4B of MBS ETFs as Treasury yields surge

Mortgage-backed securities and MBS-focused ETFs saw record outflows in September, including about $342M from Simplify MBS ETF and $246M from a Schwab mortgage-backed securities fund.

Reported · Written up by our desk · Mortgages

Investors have been rotating out of U.S. mortgage-backed securities at a record pace as rising Treasury yields reduce returns, according to Bisnow, citing Bloomberg.

The report says investors sold $2.4B worth of shares in exchange-traded funds that hold U.S. mortgage-backed securities, marking the fastest sell-off since March 2020.

Bisnow also points to September performance and outflows across major MBS ETF funds, including an approximately 3% total-return decline for BlackRock’s iShares MBS ETF, $342M in outflows from Simplify MBS ETF, and $246M in outflows for the month from a Schwab mortgage-backed securities ETF.

It attributes the pressure on MBS to the way bond yields rising makes the securities less attractive, and notes that the 10-year Treasury yield cleared 5.3% this week, its highest level since 2007, affecting the pricing and borrowing costs used across debt markets, including commercial real estate.

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