Definition
The Barclay’s Mortgage Backed Securities Index (often abbreviated as the MBS Index) is a financial benchmark published by Barclay’s Capital. The index is designed to track the performance of mortgage-backed securities issued by the Government National Mortgage Association (GNMA), the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac). It is a component of the Barclay’s U.S. Aggregate Bond Index, which encompasses a wide range of fixed income securities.
Examples
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Index Mutual Funds: Many index mutual funds aim to mimic the mortgage-backed securities market and use the Barclay’s Mortgage Backed Securities Index as a performance benchmark.
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Exchange-Traded Funds (ETFs): ETFs that track mortgage-backed securities often use the MBS Index to measure and show their performance.
Example Fund: The iShares MBS ETF (MBB) uses the Barclay’s U.S. MBS Index as its performance benchmark.
Frequently Asked Questions (FAQs)
What is the Barclay’s Mortgage Back Securities Index?
The Barclay’s Mortgage Backed Securities Index is a benchmark that tracks the performance of mortgage-backed securities issued by GNMA, Fannie Mae, and Freddie Mac.
Why is the Barclay’s MBS Index important?
The index is widely used by mutual funds and ETFs to benchmark their performance, providing a standard measure for the performance of the mortgage-backed securities market.
How is the Barclay’s MBS Index calculated?
The index is calculated based on the aggregate performance of securities from the major MBS issuers (GNMA, Fannie Mae, and Freddie Mac), taking into account factors such as prices, yields, and interest accruals.
Can individual investors invest in the Barclay’s MBS Index?
Individual investors cannot directly invest in the index but can invest in funds or ETFs that track the index.
Who publishes the Barclay’s MBS Index?
The index is published by Barclay’s Capital, a leading global investment bank and financial services provider.
What is the relationship between the Barclay’s MBS Index and the U.S. Aggregate Bond Index?
The Barclay’s MBS Index is a component of the broader Barclay’s U.S. Aggregate Bond Index, which includes a wide range of U.S. investment-grade bonds.
Which types of securities are included in the Barclay’s MBS Index?
The index includes mortgage-backed securities issued by GNMA, Fannie Mae, and Freddie Mac.
Related Terms
Mortgage-Backed Securities (MBS)
Definition: Mortgage-backed securities are investment products backed by a pool of mortgages. They provide steady income streams from residential and commercial mortgage payments.
GNMA (Ginnie Mae)
Definition: The Government National Mortgage Association (GNMA or Ginnie Mae) is a U.S. government corporation that aims to increase affordability for home loans, predominantly by backing lender-issued mortgage bonds with U.S. government guarantees.
Fannie Mae
Definition: The Federal National Mortgage Association (FNMA or Fannie Mae) is a government-sponsored enterprise (GSE) that provides liquidity to the mortgage market by purchasing loans from lenders.
Freddie Mac
Definition: The Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) is a GSE that plays a similar role to Fannie Mae in supporting the U.S. housing market by buying mortgages from lenders.
Online Resources
References
- Barclays Capital. “Barclay’s U.S. Aggregate Bond Index Factsheet”
- SEC, “Exchange-traded Funds (ETFs)”
- Morningstar, “Understanding Bond Index Funds”
Suggested Books for Further Studies
- “The Handbook of Mortgage-Backed Securities” by Frank J. Fabozzi
- “Innovations in Bond Portfolio Management: Duration Analysis and Immunization” by Gautam Bakshi and Lev Dynkin
- “Investing in Mortgage-Backed and Asset-Backed Securities: Financial Modeling with R and Open Source Analytics” by Glenn M. Schultz
