$8T mortgage-debt market to be impacted after SVB collapse, WSJ reports

Strains in the banking sector are now impacting a roughly $8T bond market considered almost as safe as U.S. government bonds, Matt Wirz of The Wall Street Journal reports. Agency mortgage bonds are widely held by banks, insurers, and bond funds because they are backed by mortgage loans from government lenders Fannie Mae and Freddie Mac. The bonds are less likely to default than most debt and can be bought and sold quickly. However, these agency mortgage-backed securities, MBS, are vulnerable to rising interest rates, which pushed their prices down last year and saddled banks such as SVB (SIVB) with unrealized losses. WIth the Federal Deposit Insurance Corp. taking over SVB, investors expect the company’s bonds to be sold off soon, adding supply to the weakened market and pushing prices even lower. Signature Bank (SBNY) and First Republic Bank (FRC) both own far less agency MBS than the $78B SVB reported owning December 31. Meanwhile, among midsized U.S. financial institutions, Charles Schwab (CS), Truist Financial (TFC), and U.S. Bancorp (USB) are some of the largest holders of agency MBS. Reference Link