Yihai Yu is an Executive Director and Global Head of Mortgage Research, focusing on development of mortgage models and research strategies. Previously, Yihai was a Director at Credit Suisse and Head of Agency MBS Modeling. Yihai received his Ph.D. in Physics and an M.S. in Computer Science from the University of Georgia.
Research and Insights
Articles by Yihai Yu
Do Agency CMOs’ Financed Emissions Have Duration?4 mins read Blog | Jul 20, 2023 |
The market for collateralized mortgage obligations backed by agency residential mortgage-backed securities is a major source of financing for U.S. homeownership. But what is this market’s total emissions footprint? We use our model to calculate it.
Agency MBS Are Going Social5 mins read Blog | Jun 20, 2023 |
Fannie Mae and Freddie Mac have begun disclosing socially focused borrower data for all pools of U.S.-agency mortgage-backed securities. How can that data inform MBS investors’ models for prepayment risk?
How Making US Mortgages Portable Could Impact MBS Investors6 mins read Blog | Jun 14, 2023 |
U.S. mortgages are generally not portable. While there would be legal hurdles to overcome to reverse the situation, such a move could benefit not only homeowners, but potentially investors in mortgage-backed securities.
MSCI Agency MBS Model Version 2.1: Single-Family Social IndexResearch Report | Jun 1, 2023 |
In November 2022, Fannie Mae and Freddie Mac posted a one-time historical file to provide the Social Criteria Share (SCS) and the Social Density Score (SDS) for all active and inactive MBS pools issued since January 2010. This Model Insight document describes the Agency MBS Prepayment Model Version 2.1, (MSCI2.1) that includes the new social disclosure data.
MBS Valuation and Risk Management Under SOFR7 mins read Blog | Mar 13, 2023 |
With LIBOR’s imminent cessation, the transition from LIBOR to new benchmark the secured overnight financing rate (SOFR) is entering a new stage. We analyze the potential impact on valuation frameworks and hedging practices for mortgage-backed securities.
Agency MBS in 2023: Uncharted Territory6 mins read Blog | Feb 15, 2023 |
Rates spiked in 2022 as the Federal Reserve started quantitative tightening, pushing the prices of most agency mortgage-backed securities into discount territory, while prepayment speeds have slowed to a historical low. The market has entered uncharted territory.
Riding Rising Interest Rates with the Agency-MBS Model4 mins read Blog | Mar 1, 2022 |
Expectations of higher inflation dominated the market for U.S. agency mortgage-backed securities in 2021. We reviewed the performance of our agency-MBS model in 2021, to assess its accuracy and help investors manage MBS risk through what may be a volatile 2022.
Higher Agency Loan-Size Limit: A Booster Shot in ARMs?4 mins read Blog | Jan 10, 2022 |
Securitizations for U.S. agency adjustable-rate mortgages have declined since the 2008 global financial crisis. But could a loan-limit increase by the government-sponsored enterprises, boost issuance of agency-ARM mortgage-backed securities?
Managing Against MBS Indexes: A Duration Perspective5 mins read Blog | Jul 30, 2021 |
Mortgage-backed securities constitute a significant portion of fixed-income indexes. Managing MBS portfolios against these indexes depends heavily on an understanding of the dynamics of MBS duration, especially in volatile markets.
Chinese RMBS: A Way to Diversify Fixed-Income Portfolios?6 mins read Blog | Jul 7, 2021 |
The market in Chinese residential mortgage-backed securities is growing, as global investors are eying the segment’s relatively high yield and potential for diversification, but seeking improved credit ratings and transparency in data and pricing.
Securitized Products’ LIBOR Transition Picking Up Pace5 mins read Blog | Jun 22, 2021 |
In 2021, there has been significant progress in the transition from the LIBOR reference rate to its replacement, SOFR. But investors in securitized products are grappling with the challenge of the LIBOR-SOFR transition and its impact on their analytics.
US House Price Projections from the Economic Impact of the CoronavirusResearch Report | Apr 30, 2021 |
Could coronavirus-induced economic shocks hurt U.S. house prices as much as the 2008 global financial crisis did? This article identifies four drivers that could produce much milder house-price depreciation this time.
A New COVID-19 Regime for MBS?5 mins read Blog | Feb 17, 2021 |
In 2020, the Federal Reserve’s purchases of mortgage-backed securities, low interest rates, mortgage-underwriting policy changes and technology advancements led to a historic refinance frenzy and posed an unprecedented challenge for MBS risk management.
Can MBS Duration Turn Negative?5 mins read Blog | Sep 29, 2020 |
As mortgage rates have hit record-breaking lows, prepayment speeds have doubled. With the combination of a high price premium and elevated prepayment speed, could duration of mortgage-backed securities stray into negative territory?
Are Securitized Products Ready for the LIBOR-SOFR Transition?5 mins read Blog | Sep 2, 2020 |
Will the securitization industry be ready for the transition from LIBOR to the secured overnight financing rate (SOFR), as it faces the fact that LIBOR can no longer be guaranteed beyond the end of 2021? As the industry mobilizes, significant challenges remain.
Could coronavirus depress US housing prices?Blog | Apr 15, 2020 |
The large economic shocks unleashed by the coronavirus pandemic could be comparable to or even exceed those of the 2008 global financial crisis (GFC). We used our models to assess whether these shocks could hurt U.S. housing prices as much as the GFC did.
Updating the MSCI Agency MBS model for the COVID-19 crisisBlog | Mar 24, 2020 |
The COVID-19 pandemic has severely strained U.S. housing finance, distorting near-term prepayment speeds for mortgage-backed securities. With MBS in uncharted territory, we updated the MSCI Agency MBS Model to help investors during the crisis.
Coronavirus and a potential MBS convexity whipsawBlog | Mar 6, 2020 |
Amid rising fears that the human toll of coronavirus will have a significant impact on the global economy, investors have sought safety in Treasurys and driven yields to all-time lows. This rate rally has posed a hedging challenge for investors in mortgage-backed securities.
MBS prepayment in 2020: Looking back, looking aheadBlog | Jan 21, 2020 |
Drawing on two decades of U.S. data on MBS prepayment and borrower incentives to refinance, we used our model to look at three potential prepayment themes for 2020.
A reality check for MBS duration riskBlog | Aug 15, 2019 |
Empirical duration data can be used to check whether models for mortgage-backed securities are accurately measuring interest-rate risk.
Fed policy, the credit cycle and real estateBlog | May 28, 2019 |
Amid the uncertainty over Federal Reserve policy, investors in commercial real estate (CRE) are confronting asset-allocation challenges and growing concerns about CRE valuation and debt levels, after an extended period of easy credit.
Are You Ready for Uniform MBS? (Part 2)Blog | Apr 26, 2019 |
Aligning prepayment speeds of Fannie Mae and Freddie Mac securities presents a major challenge to the success of uniform mortgage-backed securities (UMBS), which the two government-sponsored enterprises will launch on June 3.
Are You Ready For Uniform MBS? (Part 1)Blog | Apr 8, 2019 |
Fannie & Freddie will conclude Single Security Initiative (SSI) June 3, 2019, creating a single to-be-announced (TBA) market & a new TBA security: the uniform mortgage-backed security (UMBS)
How mortgage fees affect rates and spreadsBlog | Feb 7, 2019 |
How could potential changes in U.S. mortgage policy and possible long-term industry trends affect mortgage-related fees and rate spreads?
Managing MBS risk in a rising rate environment (Part 2)Blog | Nov 21, 2018 |
Will U.S. homeowners slow down the heady prepayment rate on their mortgages — even if interest rates remain unchanged, thus potentially harming returns of mortgage-backed securities (MBS) and extending the duration of these securities?
MSCI Agency Fixed Rate Base Prepayment ModelResearch Report | Sep 18, 2018 |
Two types of prepayment risk challenge the MBS investor: contraction and extension. Contraction risk arises as prepayment increases, and extension risk occurs when prepayment decreases. Contraction risk had been the dominating concern as the global fixed income market experienced a secular rally for 35 years. Now, as mortgages rates are rising, extension is now on the investor’s radar, and this requires a solid understanding of base prepayment speeds. We present a detailed decomposition of...
MSCI Agency Fixed Rate Refinance Prepayment ModelResearch Report | Sep 18, 2018 |
The greatest MBS prepayment risk is driven by borrowers’ economic incentive to lower their monthly payments, i.e., to refinance their existing mortgage to lower mortgage rates. For the past 20 years, the shape of the refinance S-curve has changed numerous times due to prepayment regime shifts driven by new government policies/programs, changing underwriting standards, the housing price cycle, consumer behavior adjustments, and technology advancements. An accurately calibrated and well-behaved...