Despite Fuss, Mortgage-Backed Bonds Have Fans

Wall Street Journal (08/22/08) P. C3; Zeng, Min
While many investors are steering clear of agency mortgage-backed securities until more details about the Treasury's rescue plan for Fannie Mae and Freddie Mac are released, Pacific Investment Management Co. raised the mortgage-bond holdings in its $129.56 billion Total Return Fund to 65 percent in July from 61 percent the prior month. Steve Rodosky, head of Treasury and derivatives trading at Pimco, believes agency MBS remain attractive investments, noting, "You are getting a collateralized piece of paper at a significantly wider spread." Rodosky further believes the Treasury's rescue plan might put shareholders at a disadvantage, but it likely will protect agency MBS investors. He concludes that the plan would "allow the GSEs to begin [building] their books once again instead of defending their books."