Forbes has reported a notable increase in shares for the MBS bond fund from Barclays. Large Inflows of money are going into the Mortgage Backed Security ETF’s. The King of Bonds Bill Gross has also shifted a significant amount of capital into MBS. What makes Mortgage Backed Securities appealing is there backing by the U.S. Government. This backing causes MBS to be safe like U.S. Treasuries. You get safety of principal, a solid dividend yield, and backing from the U.S. Government. Also, with the Federal Reserve possibly initiating a QE3 and buying more MBS, you have a strong catalyst for capital appreciation. Buying MBS ETF’s now is like front running the Federal Reserve. I think MBS ETF’s are a strong buy here before the Federal Reserve announces QE3 or Operation Twist.
ETF’s to buy include: VMBS and MBB