Property Prices Aid Mortgage Bonds in Insurer Models

Residential and commercial mortgage-backed securities look a little more attractive in this year’s just-released National Association of Insurance Commissioners model results, according to Barclays.

“While the probability weights for the future scenarios remain unchanged, the [home price appreciation] or [commercial real estate] growth assumptions embedded in them are somewhat better this year,” Barclays’ securitization researchers said in a report Friday.

Insurers use PIMCO’s model for RMBS and Blackrock’s model for CMBS to determine bonds’ regulatory risk weighting categories.

These investors need to hold more capital against bonds in higher risk categories. Rising property prices help mitigate bonds’ modeled risks.