This analysis reevaluates the Simplify MBS ETF (MTBA), shifting its recommendation from 'buy' to 'hold'. The core argument centers on the compression of mortgage spreads, which restricts the ETF's potential for capital appreciation. While MTBA continues to offer an attractive structural carry, serving as a reliable income component, investors should be mindful of broader macroeconomic risks. These include the Federal Reserve's balance sheet reduction and the potential for increased spread volatility, both of which could introduce downside risk. Furthermore, the ETF's actively managed approach and its 0.15% expense ratio, though justifiable by its strategy, are comparatively higher than those of passively managed alternatives.
Navigating Volatility: A Prudent Approach to MBS Investing
The Evolution of Investment Strategy for Simplify MBS ETF (MTBA)
My previous assessment of the Simplify MBS ETF (MTBA) advocated for its acquisition, primarily due to its appealing structural carry. This inherent advantage provided a clear rationale for investment. However, market conditions are dynamic, necessitating a re-evaluation of this stance.
