AGNC Projects Stable Agency MBS Spreads Amidst Declining 2026 Supply

AGNC Investment Corp. anticipates that Agency mortgage-backed securities (MBS) spreads will likely remain within a 120-160 basis point range. This forecast is influenced by an expected reduction in the net new supply of these securities for 2026, projected to fall to approximately $150 billion.

AGNC Investment Corp. foresees a steady outlook for Agency mortgage-backed securities (MBS) spreads in the near future. The company projects that these spreads will fluctuate within a bandwidth of 120 to 160 basis points, a range it expects to hold firm. This projection, reported by Seeking Alpha, comes as the market prepares for a notable decrease in the availability of new Agency MBS. Specifically, AGNC expects the net new supply for 2026 to diminish significantly, settling at around $150 billion. This anticipated reduction in fresh securities entering the market plays a crucial role in the company's spread outlook. Agency MBS are debt instruments representing claims to the cash flows from pools of mortgage loans, guaranteed by government-sponsored enterprises like Fannie Mae and Freddie Mac. The spread refers to the difference in yield between these securities and a benchmark, often U.S. Treasury bonds. A stable spread range can indicate predictable performance and risk assessment for investors. Several factors can influence the supply of Agency MBS, including refinancing activity, new home sales, and broader housing market dynamics. A decrease in net new supply often implies a more constrained market, which can contribute to the stability of existing security spreads. Investors and analysts closely monitor these supply figures as they can impact portfolio strategies and investment decisions in the fixed-income sector. AGNC's perspective provides insight into how a major player in the mortgage real estate investment trust (REIT) space is evaluating future market conditions. The company's business model heavily relies on investing in Agency MBS, making its forecasts particularly relevant for understanding potential trends in this specialized segment of the bond market. The consistency in spread expectations, paired with the projected supply reduction, paints a picture of a market that could see reduced volatility in this specific area through 2026.