On the heels of recent corporate blow-ups (e.g. Qwest and Worldcom), a number of money managers are flocking from corporates into mortgages. Those who have made the jump into MBS have said that they would rather deal with convexity risk than credit risk, analysts argue.
With more and more managers doing this crossover, UBS Warburg focused on the corporate-mortgage trade in a recent report. In its analysis, UBS showed that while the spreads on both sectors can be considered wide by historical standards, corporates are the relatively wider of the two. But, having said that, analysts also noted that, "corporate spreads are also as volatile as they have been at any point since 1986."