Commentary Oct 2026 Securitized Products Briefing

Higher rates and wider valuation dispersion are making securitized products more attractive, but future excess returns should depend increasingly on active security selection rather than broad market exposure.

• Fixed-rate assets weakened in the third quarter of 2026 as Treasury yields rose, while floating-rate CLOs and leveraged loans generated positive returns; the dispersion favors securities with limited interest-rate sensitivity.
• Agency MBS returned -4.25% versus -3.04% for Treasuries, while only approximately 2% of the mortgage market was refinanceable at prevailing rates, limiting prepayment risk; current-coupon spreads widened about 18 basis points.
• Non-agency RMBS remained resilient despite mortgage rates above 7%, supported by constrained housing supply, homeowner equity and stable borrowers; the preferred opportunities are senior residential credit, new-issue non-QM mortgages and seasoned CRT deals.
• Non-agency CMBS faced greater refinancing pressure, especially for lower-quality assets and near-term maturities, while industrial and multifamily properties retained stable cash flows; ABS benefited from resilient consumer fundamentals, strong industrial collateral and record issuance momentum.
• CLOs remained resilient because floating-rate coupons cushioned the rise in Treasury yields, and DoubleLine favored senior investment-grade CLOs and selectively attractive AAA and BBB tranches based on spreads, prices, collateral quality and manager skill.

Takeaway: The firm sees compelling risk-adjusted income across securitized markets, with Agency MBS, selected residential and commercial mortgage credit, ABS and CLOs offering opportunities, but warns that rising rates, refinancing risk and increasing dispersion require disciplined security- and structure-level selection.