Thursday, August 21, 2008
MBS Generics vs TBA
Many confuse between the two. Here I make some clarifications --Generics is a kind MBS security. to-be-announced(TBA) generally refers to a trading method. Most/nearly all Generics traded on TBA. That is why people usually confused the two. But agency MBS Pool, not necesarry Generics, can be traded on TBA basis. --Both of them increase mkt liquidity. a.Generics is created to index and simplify market. With more than half million outstading MBS pools, investors will have a hard time trading them. Generics enable investors to focus on a few dimension, (issuers, programs, coupon) without being bothered by too much details. b.TBA makes pools fungible - interchangable.