Agency MBS as Safe Assets

Zhiguo He () and Zhaogang Song

The Review of Financial Studies, 2026, vol. 39, issue 2, 387-426

Abstract: Measured as yield spreads against Treasury securities and AAA corporate bonds, the convenience premium of newly issued agency MBS averages more than half of the long-term Treasury convenience premium. The agency MBS convenience premium and issuance amount vary negatively with mortgage rate, consistent with a prepayment-driven channel. Placing agencies into conservatorship in 2008 and introducing liquidity regulations in 2013 significantly affected MBS convenience premium, consistent with government guarantee and regulatory treatment channels. Analyses of dispersion of dealers’ prepayment forecasts, seasoned MBS, and investors’ MBS holdings deliver further economic implications for agency MBS as safe assets.

Keywords: G12; G18; G21; E58 (search for similar items in EconPapers)
Date: 2026
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Working Paper: Agency MBS as Safe Assets (2022)
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