Lehman Brothers recently announced it would include U.S. agency hybrid ARMs as part of the MBS Index beginning April 1, 2007. As of the Sept. 28 close, the U.S. Hybrid ARM Index contained 1,285 bonds with a market value of $321 billion, analysts said. The projected share of hybrids within the MBS Index based on Sept. 28's close is 10.7%. Analysts also noted that given the shorter duration of ARM securities, the MBS Index is estimated to shorten by 0.16 years.
As a percentage of the U.S. Aggregate Index, hybrid ARMs are projected to represent 3.6% by market value. With the addition of the hybrids, the MBS Index is forecast to represent 37.3% of the U.S. Aggregate Index. In addition, Lehman analysts reported that the Aggregate Index would likely shorten by 0.10 years. Finally, analysts stated that this addition would not affect the Global Aggregate Index.