Bad Bunny vs. Convexity-Cursed Chinchilla, Explosion in Ginnie Custom Issuance, And Supply Deficit in Spec Pools

Kirill Krylov and Steven Scheerer examine the strong fund inflows seen in January, the rebound of active inflows vs passive at the end of the month, and how flows may be an indicator of MBS investors increasingly viewing GSE MBS buying not as a one-off program, but as part of a broader policy backstop. They highlight the risks of policy-driven spread tightening, and how GSE reform goals collide with using the agencies as rate-management tools. The episode also dives into shifting issuance dynamics, including a decline in specified pool share and a rapid migration from Ginnie TBA-eligible MULTIs into custom pools as investors seek better convexity control.