About MBS/ABS
Minimum Investments, Transaction Costs and Liquidity
The minimum investment for a mortgage security varies according to the structure of the offering, but most tranches sold to individual investors require a minimum investment of $1,000. Mortgage security investments are also offered in the form of mutual funds or unit trusts, which typically have similar investment minimums.
A national network of mortgage securities dealers sells, trades, and makes markets in mortgage securities. These transactions are executed over-thecounter (OTC), from counterparty to counterparty, instead of on an exchange.
Mortgage securities are bought and sold between dealers and investors like other debt instruments. Dealers trade the securities at a net cost that includes their own spread, or profit, on the transaction. Spreads on mortgage security transactions may be wider than spreads on Treasury security transactions because Treasury securities have a broader and deeper secondary market and are therefore more liquid.
Although there is a secondary market for many types of mortgage securities, the degree of liquidity can vary widely with economic and market conditions. If a mortgage security is sold in the secondary market rather than held until the final principal payment, the security may be worth more or less than its original face value, and may be worth less than the price at which it was purchased.
All information and opinions contained in this publication were produced by the Securities Industry and Financial Markets Association from our membership and other sources believed by the Association to be accurate and reliable. By providing this general information, the Securities Industry and Financial Markets Association makes neither a recommendation as to the appropriateness of investing in fixed-income securities nor is it providing any specific investment advice for any particular investor. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and sources may be required to make informed investment decisions.