In a report this morning, Deutsche Bank Securities recommends buying GNMA 6s versus a combo sale of GOLD 6s and 5.5s to take advantage of recent GNMA cheapening.

The firm said that by taking a position in GNMAs vs. GOLDs, buysiders can take advantage of the differential in prepayment speeds, which is likely to widen if rates stay low. Investors can also benefit from the OAS cheapness of GNMAs. Nothing that the GNMA 6 duration is nearly halfway between the GOLD 5.5 and 6 duration, Deutsche recommends investors buy GNMA 6s while selling equal parts of GOLD 5.5s and GOLD 6s.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.