McGill University has put together this presentation on fixed income
securities, with specific sections on mortgage backed securities
(MBS), and more specifically GNMAs. Their GNMA pricing model is found
on page 30. Other models exist, and of course software has been
developed that crunches the numbers through the models to assist
analysts in pricing GNMAs, just as it exists for other financial
As you can see, GNMA pricing is complicated, based on financial models
rather than a fixed, set number. GNMA returns vary "...according to
the age of the pool [of mortgages]" and "...it is a market based on
forward trading", as quoted from my very old and dusty textbook,
Investment Analysis and Portfolio Management, Cohen, Zinbarg Zeikel.
What this means is that pricing is based on financial analysts and
traders' opinions on where interest rates will go in the future. If
interest rates drop, the prepayment of existing loans will increase.
The pool of GNMA mortgages will be paid off sooner. If interest rates
go up, then of course homeowners will hang on to their old mortgage
and the GNMA pool for a given GNMA will be paid off more slowly.
The result is that pricing is affected by opinion about interest rates
and the deals they make for future transactions based on those
opinions. That's what the book is talking about when they say
"forward trading". Just to complicate it more, price also varies
depending on the contents of a given GNMA. Each GNMA is priced
differently because of the content (the pool) of mortgages is
I'll explain in very general terms how GNMA securities fluctuate with
interest rates. Please keep in mind that ***this is an explanation
and in no way to be taken as investment advice!*** I mean no offense
if this is TOO basic.
A given bond drops in value when interest rates go up, by an amount
(roughly) that brings its return in line with current rates. The
holder of an individual bond will not necessarily see this "loss"
unless he sells. In other words your typical retiree who owns some
bonds will keep getting the bond interest rate checks in the mail
without any change. Only if he were to try to sell his bonds would he
see his loss or gain based on what interest rates had done since he
acquired his bond. GNMA mutual funds work in many ways like other
mutual funds, probably closest in comparison to bond funds. As with
bond funds, an investor experiences gains or losses of his holdings
based on a variety of factors such as interest rates and what actions
the fund manager took. The difference then between an individual
bond/GNMA and a bond/GNMA fund is that in a fund those losses in value
can be real, because funds buy and sell bonds/GNMAs. You the investor
are not tied to a designated income stream from a designated pool of
mortgages (i.e. a specific GNMA). Here is an article, 'Bond vs Bond
Funds' from Smart Money that talks about this concept here:
On the other hand, Kiplinger says "You should also stay away from
individual mortgage-backed securities because you can't predict when
you'll get your money back; it depends on when homeowners sell or
refinance. Moreover, you have to know the mortgage market fairly well
to avoid buying risky securities. And mortgage-backed securities
present problems at tax time. A certain percentage of the return on
your investment isn't taxable, but you may not get an accurate Form
1099 until mid March. Funds such as Vanguard GNMA (VFIIX) and American
Century GNMA (BGNMX) are a better alternative." See the article here:
So now that you have the general concept of securities tied to
interest rates, I'll give you some places to go for quotes.
Smith Barney web site provides this (I am in no way affiliated with
Vanguard provides this on their GNMA fund:
Hope that gives you a good place to start!