03/18/2013 | By Allen Kenney
CYS is a specialty finance company that invests on a leveraged basis in residential mortgage pass-through securities for which the principal and interest payments are guaranteed by the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), or the Government National Mortgage Association (Ginnie Mae), and collateralized by single-family residential mortgage loans. The company has headquarters in Waltham, Mass., and New York. Grant was a senior portfolio manager and member of the aggregate bond team at Fidelity Investments, where he managed fixed income assets including the Mortgage Securities Fund, the Investment Grade Bond Fund, the Total Bond Fund, the fixed income portion of the Fidelity Puritan Fund and the Strategic Income Fund.
Grant discussed the current state of the housing market and its perceived recovery.
“I think it’s pretty clear, especially from RMBS performance, that the residential housing market is improving,” Grant said. “It seems to be sustainable.”
Grant said the benefits of the recovery should soon begin to accrue to his company.
“What it probably means is that we’ll have a steeper yield curve at some point in time and wider spreads in the mortgage market,” he said. “The (Federal Reserve) at some point will probably slow down and eventually stop its purchases of mortgage-backed securities. The outlook for us is actually pretty good longer term. In the near term, we’re still working through some transition and tapering of purchases by the Fed, but the outlook is very good, especially for next year.”
Grant offered some thoughts on key fundamental measures that he watches closely.
“The key is the spread between our financing rates and 10-year Treasurys as a good benchmark,” Grant said. “Right now, with the 10-year Treasury around 1.9 percent, it’s actually pretty narrow. Right now, spreads are pretty narrow in the mortgage market, and we do expect that to widen out once the economy starts to do a little bit better and the Fed starts to take its foot off the gas.”