JP Morgan has launched a new agency pass-through securities index, the JP Morgan MBS Agency Index (MAX) which is designed to act as an efficient and in-depth measure of the US MBS market’s largest and most traded fixed-rate agency programs.
In this all-encompassing benchmark, JP Morgan combines 30-year, 15-year and now 20-year MBS in an index containing 404 aggregates that cover almost 85 per cent of the US agency market (as of June 30, 2017). The MAX index reduces tracking error by reflecting monthly agency factor updates from the 6th business day of the month, compared to delays until the 15th business day in other indices.
“Agency MBS is one of the largest and most liquid asset classes in the US. With the launch of MAX, we hope to further engage our clients who wish to invest in this sector,” says Brian Ye, Head of Agency MBS Research at JP Morgan.
The JP Morgan MAX Index introduces transparency with accurate pricing, aggregated from the CUSIP level up, making ours the first institutional agency mortgage index built on individual security valuations. The granular, same day settled prices in the MAX Index will be a welcome choice for benchmarked managers over other mortgage index pricing, which relies on a combination of PSA settlement and internal trader marks. With the use of same day settled prices, volatility experienced from forward settlement switches is reduced, as is the tracking error for asset managers with daily portfolio flows.
“The JP Morgan MAX Index is a contemporary and comprehensive benchmark of the agency MBS market. Our index accurately tracks an extensive history of the asset class, while offering modern refinements including robust third party pricing, timely factor updates and customisation opportunities. This index has been tailored to facilitate replication for benchmark users,” adds Gloria Kim, Head of Global Index Research at JP Morgan.
The MAX Index brings forth an entirely rules-based structure supported by Global Index Research Group, PricingDirect and BondStudio platforms, which contribute more than 50 years of product experience. The new market-value weighted benchmark is introduced as a comprehensive addition to the widely-used JP Morgan suite of benchmark indices. Eligible fixed-rate mortgage pools must be issued through standard FNMA, FHLMC Gold, GNMA I and GNMA II programs. As proportions of the MAX index, FNMA, FHLMC and GNMA I/II mortgages make up 43 per cent, 27 per cent and 30 per cent of the benchmark, respectively.
