Mortgage-backed bond
A security whose payments are backed by what borrowers pay on a pool of mortgage loans.
How to read the number
The investor buys the cash flow of many borrowers rather than the promise of one company: risk is spread across the pool instead of sitting on a single issuer.
When the metric lies
The payment schedule floats. Borrowers repay mortgages early, so money comes back ahead of schedule — precisely when rates have fallen and there is nowhere good to put it.
Also known as: mortgage bond, rmbs