With 3/1 hybrid ARMs currently rich to their longer-dated counterparts, investors would gain from extending into 5/1 or 7/1 hybrid ARMs, said a recent report from researchers at UBSWarburg.

UBSWarburg's report demonstrates that the yield pickup derived from an extension play in hybrid ARMs is more attractive than a comparable ride out on the yield curve in other markets such as Treasurys, Agency and Corporate debt.

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