Investing.com -- Goldman Sachs recommends a modest overweight allocation to agency mortgage-backed securities after the current coupon Treasury option-adjusted spread widened to 36 basis points as of Monday, its widest level since August 2025.

The firm noted that the sharp rise in long-end U.S. Treasury yields in recent months pushed current coupon MBS yields above 6%, placing them at the 95th percentile of their range over the past four years.

Goldman also highlighted that agency MBS appears attractive relative to investment-grade corporate bonds, with the value gap widening as the securities moved in opposite directions recently. Since September 8, MBS current coupon OAS widened by roughly 10 basis points, while the OAS of the investment-grade corporate index tightened by 3 basis points.

The current 36 basis point spread level matches the average seen in 2024 and 2025, years when money managers added more than $200 billion of agency MBS. Goldman said it is less concerned about the roughly $85 billion of net agency MBS supply that money managers may need to absorb in the second half of 2026.

Goldman's interest rates strategists expect 10-year Treasury yields to end 2026 at 4.75%. The firm maintains its year-end target for current coupon Treasury OAS at 25 basis points.

The bank identified FN 5.0s and FN 5.5s at discount dollar prices as attractive options for real money investors at current levels.