What is a mortgage-backed securities ETF?

Mortgage-backed securities (MBS) ETFs hold pools of mortgages packaged into securities. They can offer attractive yield, but they come with unique risks.

A key risk is prepayment: when borrowers refinance or repay early, cash flows change. That can affect returns, especially when rates move. MBS ETFs also carry interest-rate risk and can be impacted by housing and credit conditions depending on the type of MBS.

If you're considering an MBS ETF, check whether it holds agency MBS (generally lower credit risk) or non-agency MBS (higher credit risk), and look at duration, yield, and historical drawdowns.