While the market is currently facing mini rate dips, this should change to a continuous upward tick in rates. Under this scenario, mortgage-backed investors are focused on hedging extension risk.

"We think the best mortgage investment strategy in structured product to employ during times like these is one that involves more predictable and stable cashflows with tight windows and lockout," said Kevin Jackson, vice president at RBC Dain Rauscher in a recent report.

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.