Post #852 by richinmd on the Retirement Investing board

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Anyone familiar with MTBA (Simplify MBS ETF)? Fairly new ETF invested in AA securities. Looks like about 50% is in FNMA 5.5 and 5% securities.
I hadn't heard of Simplify but they have a number of ETFs, some well rated ones by Morningstar FWIW.

I did find https://etfgi.com/news/stories/2023/11/simplify-la...

NOTE: This is from November 2023. So a couple of years old.

MTBA invests in mortgage-backed securities (MBS), which provide attractive yields versus comparable US Treasuries while carrying little to no credit risk. Unlike the MBS which make up the benchmark Bloomberg U.S. MBS Index and which populate the holdings of the large, legacy MBS-focused ETFs, MTBA will focus on providing exposure to newer MBS issued in 2023.

“MBS issued this year have larger coupons and shorter durations in comparison to previous vintages, providing a potential cushion against losses if the Federal Reserve keeps rates ‘higher for longer,’ which is something I have been suggesting will be the case for some time,” said Harley Bassman, Managing Partner at Simplify and creator of the strategy underpinning MTBA. “Approaches that only mimic the broad MBS universe are bound to disappoint since more than 70% of all 30-year MBS have coupons between 2% and 3.5% with an average price near 79, meaning investors are left with small distributions, large durations, and poor positioning in the event of a hard landing.”

MTBA will initially invest in the Federal National Mortgage Association (Fannie Mae) 6.0% coupon bonds. This exposure will be obtained via investments in To-Be-Announced (TBA) contracts, which are MBS forward contracts. These TBA contracts provide improved liquidity versus buying MBS directly, have greater operational and tax simplicity, and will be rolled monthly as they approach expiration.

MTBA is expected to deliver a monthly distribution and will do so with no lockups or K-1 tax forms.

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