"To the extent that there is widening pressure on the basis that argues for being in shorter spread duration product, and we also like going up-in-coupon for the hedged-adjusted carry," he said.
The wind down has been well-telegraphed by the central bank, helping to dampen spread widening and hence any negative effect on mortgage rates for borrowers, despite the massive size of its holdings.
"The Fed built its portfolio during a time of crisis, they essentially were making it up as they went along. The unwind of the balance sheet, they hope, will be as exciting as watching paint dry," Schmidt said.
This article was provided by Bloomberg News.