MBS stands for Mortgage-Backed Securities, which are asset-backed securities that are secured by a mortgage or collection of mortgages. Both types of securities represent claims on underlying assets, but they differ significantly in structure, regulation, and market function.
How Structural Differences Create a Size Gap Between GBS and MBS
The global bond market, which includes all GBS, is the largest financial market in the world, with trillions of dollars in circulation. Conversely, GBS are often direct obligations of the issuer, backed by the full faith and credit of the entity, whether that be a national government or a multinational corporation.
The diversity of the GBS market allows investors to calibrate their risk exposure across a wider spectrum than the MBS market typically allows. When comparing global financial instruments, the question of whether GBS or MBS are bigger is central to understanding modern capital markets.
How Structural Differences Create a Size Gap Between GBS and MBS
These instruments allow investors to gain exposure to the housing market and provide lenders with liquidity. In contrast, GBS are issued in every major currency and by every type of sovereign entity, making them a truly global phenomenon.
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