Morgan Stanley Fixed-US RMBS Strategy Non-Agency Mortgage Monitor Triggers in N...-110912806

M IdeaUS RMBS Strategy | North America Non-Agency Mortgage Monitor: Triggers in Non-QMThrough the end of 3Q24, non-agency RMBS supply finished at $111bn, up 93% relative to the 2023 YTD level. While credit underperformance has persisted in non-QM, we are not yet concerned about the likelihood of a widespread delinquency trigger failure. Morgan Stanley & Co. LLCShikhar AgarwalStrategist Shikhar.Agarwal@morganstanley.com +1 212 761-5324 James EganStrategist James.F.Egan@MorganStanley.com +1 212 761-4715 Catherine LiuStrategist Catherine.Liu2@morganstanley.com +1 212 761-0222 Gavin ZhuStrategist Gavin.Zhu@morganstanley.com +1 212 761-3203 Gabriel Ernesto Reyes EsclasansStrategist Gabriel.Reyes.Esclasans@morganstanley.com +1 212 761-4134 Exhibit 2 : Delinquency trigger status by deal vintages051015202530352018201920202021202220232024Actual ValueLimit Trigger Value Source: Intex, Morgan Stanley Research Our 2024 Securitized Products Boot Camp slides are available here and here. A replay of the event will be made available shortly.Exhibit 1:New issue volumes by RMBS sector $- $4 $8 $12 $16 $20 $24 $28Jan-20Feb-20Mar-20Apr-20May-20Jun-20Jul-20Aug-20Sep-20Oct-20Nov-20Dec-20Jan-21Feb-21Mar-21Apr-21May-21Jun-21Jul-21Aug-21Sep-21Oct-21Nov-21Dec-21Jan-22Feb-22Mar-22Apr-22May-22Jun-22Jul-22Aug-22Sep-22Oct-22Nov-22Dec-22Jan-23Feb-23Mar-23Apr-23May-23Jun-23Jul-23Aug-23Sep-23Oct-23Nov-23Dec-23Jan-24Feb-24Mar-24Apr-24May-24Jun-24Jul-24Aug-24Sep-24in $bnIssuance MonthCRTPrimeNOO/InvestorNon-QMRPL/NPL/Seasoned/OtherSource: Bloomberg, Intex, Morgan Stanley Research Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.Key TakeawaysNon-QM and Jumbo 2.0 continued to drive the majority of the flow, finishing 3Q at $30bn and $22bn, respectively, up 45% and 210% relative to the 2023 YTD level.With NQM DQs exhibiting persistent underperformance over the last few years, the possibility of a trigger failure has come into investor focus.Currently, we estimate that only one deal is failing the delinquency trigger. We do not expect widespread trigger failure given the healthy windfall overall.October 18, 2024 12:28 PM GMTM Idea2 SpotlightNew issue commentary: Through the end of 3Q24, gross supply in non-agency RMBS finished at $111bn, up 93% relative to the 2023 YTD level ( Exhibit 3 ). Non-QM and Jumbo 2.0 continued to drive the majority of the flow, finishing 3Q at $30bn and $22bn, respectively, up 45% and 210% relative to the 2023 YTD level. In CRT (inclusive of MI CRT and CLNs), supply finished at $9bn, up 16% relative to the 20