New FTSE Canada research shows that over the past 15 years Canadian mortgage-backed securities have had higher returns with lower volatility than other government bond segments in Canada. Based on 15 years of historical market data for the recently introduced FTSE Canada NHA MBS 975 Index—the first dedicated index for this asset class—NHA MBS 975 securities have achieved higher average returns with less risk.
In addition, interest in this market, which currently has nearly $500 billion in principle outstanding, has the potential to increase going forward and the index, as well as the ETF access product, are part of the evolution to bring transparency to the mortgage market in Canada.
Marina Mets – head of Americas, fixed income product management, FTSE Russell:
“Developing the first dedicated index for the Canada NHA MBS 975 Index has given us a unique insight into the market dynamics of this very important and growing asset class for Canadian fixed income investors. Through the lens of this new index, we observe the yield pick-up and higher returns with less volatility delivered by these assets over the past 15 years as compared to other duration-matched Canadian government securities.”
“The Canada mortgage market is unique to other global mortgage markets. From the credit crisis, Canadian mortgage standards were generally more stringent than in the US with subprime mortgages, resulting in higher quality. We are excited to offer Canada retail investors access to CMHC-guaranteed mortgages for the first time through the relative transparency, efficiency and liquidity of an exchange traded fund.”
BMO Asset Management, Inc. recently licensed the FTSE Canada NHA MBS 975 Index as the basis for a new retail ETF (ZMBS) listed on the Toronto Stock Exchange (TSX). Mets and Raes will provide further insight on the Canada MBS market and opportunities for investors in a special June 3 webinar—Fully insured, AAA rated – What’s different about Canadian MBS?—with experts from BMO Global Asset Management and FTSE Russell.
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