While market participants remained glued to the topic of subprime and the future of the mortgage market, international influence on the sector also jumped onto the agenda at the International Quality & Productivity Center's Residential Mortgage-Backed Securities Forum in New York last week.
The impact that China has had on the expansion of the MBS market is something to watch going forward, noted Alec Crawford, head of agency MBS strategy at RBS Greenwich Capital. A lot of the growth in the MBS market has been a result of non-domestic buyers, he said. More specifically, "There is about $220 billion from the trade surplus in China, of which 70% is currently being used for U.S. dollar-denominated securities," he said. If there is a radical reshaping of fiscal policy, it would have a somewhat dramatic effect on the market - about 50 to 70 basis points on yield - Crawford said.