With the 5.5s and 6s currently rolling very special, there is a compelling reason to move down in coupon. In fact, several researchers on the Street last week favored the down-in-coupon trade despite the extension risk on the horizon.

Analysts from Deutsche Bank Securities said that with price appreciation appearing limited in mortgage-backed securities, they are focusing on owning mortgages for carry right now. They currently favor the lowest coupons, including 30-year 5.5s.

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.