I investors should buy FNCL 6.5 while selling FNCL 5.5, duration hedged with 10-year swaps, Barclays Capital analysts said last week. They also suggested for buyers to unwind existing FNCL 5.5/FNCL 6 trades.

Analysts noted that housing market weakness is currently a major concern for many MBS investors. Recent data from the National Association of Realtors show that the sales price of the median home dipped 9.7% over the past year. Although they acknowledged that this data series could be considered rather volatile and analysts do not really put value in its significance, the data still reflects a continuing weakness in the housing sector.

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