Where can sell-side Securitized Products Traders end up?

I'm starting full-time in Securitized Products trading next year at a top BB and am of course very excited about the role and am not by any means looking to move anytime soon. However, I want to keep my eye on the future at least a little bit so I'm wondering where the guys that trade mortgage related products end up if they leave the sell-side.

Also, I go to a semi-target, is that going to continue to haunt me when trying to find a spot on the buy-side or will the fact that I'm at a top BB be enough "pedigree"?

 
Best Response

My view is maybe a bit narrow/dated, as it pertains to the (mostly Agency) mortgage traders I am familiar with during the bank prop desk dismantling period, having interned with a few who had made the transition. My recollection is that quite a few of these guys were from a mortgage sell-side desk, but really took macro prop risk across FI product space and sometimes other asset classes as well. Mortgage traders used to combine very detailed security level analysis including prepayment speeds, homeowner supply/demand, specified pools, convexity, repo vs. roll funding with macro level analysis. Many were naturally oriented towards trading fixed income options, treasury bonds and futures, and indices as hedges and their collective hedging activity used to be able to move the market in these areas. Nowadays the Fed has bought up most of the Agency MBS, meaning many of these trading considerations are not particularly valid anymore, as their footprint has become the overwhelming technical consideration.

As a market-maker during the transition period as the Fed unwinds its purchases, think you'll probably learn a lot. But keep in mind some of the mortgage traders formerly on the sell-side will basically identify rich/cheap opportunities across several asset classes, not limited to just mortgage or even FI. Indeed the last blowout MBS opportunity was QE3, and the next blowout MBS opportunity will probably be timing and expressing a short.

 

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