# What Is To Be Announced (TBA) in Mortgage-Backed Securities?

![To Be Announced (TBA): A contract to buy or sell mortgage-backed securities at a specific date in the future.](https://www.investopedia.com/thmb/ZiyPD6CvB5vYvrXwEg9vz_ZNB7k=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Tba_final-286504e0c37b4dae966e684e74fee27b.png)

*— Investopedia / Michela Buttignol*

## What Is to Be Announced (TBA)?

TBA, meaning "To Be Announced," refers to a forward-settling process in [mortgage-backed securities (MBS)](https://www.investopedia.com/terms/m/mbs.asp) trading. In this market, [pass-through securities](https://www.investopedia.com/terms/p/passthroughsecurity.asp) from Freddie Mac, Fannie Mae, and Ginnie Mae are traded without immediate disclosure of the exact security, which increases liquidity. This system assumes MBS pools to be interchangeable, simplifying trades and enabling mortgage lenders to manage risk effectively.

Key details of the trade—issuer, maturity, and price—are agreed upon in advance, while the actual securities are specified just 48 hours before settlement. Despite its benefits, TBA trades carry risks due to counterparty default and market volatility, making professional handling advisable.

### Key Takeaways

*   TBA, or "to be announced," refers to trades of mortgage-backed securities made without initially detailing the exact securities involved.  
    
*   The TBA market includes pass-through securities from Freddie Mac, Fannie Mae, and Ginnie Mae, which adds liquidity to the MBS market.  
    
*   Counterparty default risk exists in TBA trades between execution and settlement, which can be somewhat mitigated using collateral.  
    
*   TBA is distinct from TBD (“to be determined") but often used interchangeably outside of the financial sector to indicate pending information.

## How TBA Works in Mortgage-Backed Securities

A TBA serves as a contract to purchase or sell an MBS on a specific date, but it does not include information regarding the pool number, number of pools, or the exact amount that will be included in the transaction. An MBS is a bond that is secured, or backed, by mortgage loans. Loans with similar traits are grouped together to form a pool, and that pool is subsequently sold to stand as collateral for the associated MBS.

Interest and principal payments are issued to investors at a rate based on the principal and interest payments made by the borrowers of the associated mortgages. Investors receive interest payments on a monthly basis instead of semiannually.

> **Important**
>
> The Securities Industry and Financial Markets Association establishes the settlement procedures for MBS-TBA trades.

This is because the TBA market considers MBS pools to be relatively interchangeable. The TBA process increases the overall [liquidity](https://www.investopedia.com/terms/l/liquidity.asp) of the MBS market by taking thousands of different MBSs with different characteristics and trading them through a handful of contracts. The buyers and sellers of TBA trades agree on these parameters: issuer, maturity, coupon, price, par amount, and settlement date.

Each type of agency pass-through security receives a monthly trade settlement date. Trade counterparties must exchange pool information by 3 p.m. (EST), 48 hours before the settlement date. Trades are allocated in $1 million lots.

> **Fast Fact**
>
> The TBA market is the second most active secondary market after the U.S. Treasury market.

## Analyzing the Risks of TBA Trades

Due to the forward-settling nature of the investment, the risk of counterparty default is present during the period of time between the execution of the trade and the actual settlement. The risk with this default is that in volatile markets, the non-defaulting party might not secure a similar deal once the defaulting party's plans become clear. Risk may be mitigated through the assignment of collateral to the transaction, though not all firms have immediate access to collateral management services.

In January 2014, when average daily trading volumes in the TBA market were reaching over $186 billion, the [Financial Industry Regulatory Authority (FINRA)](https://www.investopedia.com/terms/f/finra.asp) set margin requirements designed to assist in lowering risks for TBA transactions with longer settlement dates. This rule only applies to specific individuals or institutions and is not deemed necessary for transactions with short settlement periods.

## Beyond Mortgage-Backed Securities: Alternate Uses of TBA

"To be announced" can refer to other circumstances that do not involve bond markets. In these cases, TBA is most often used interchangeably with TBD, or "to be determined." Whenever there is upcoming information scheduled for release, but the exact time or date has not been set, it may appear as "TBA". For instance, a company may set its annual shareholders' meeting for sometime in the Spring of the following year, with the exact date and location TBA until it has been finalized.

Similarly, "TBA" can be used as a placeholder for dates or other information yet to be determined for purposes of shipping and logistics, pending news headlines, or personnel changes. For instance, a company may wish to hire a new manager, with the successful candidate TBA after negotiations have been concluded.

## Does TBA Mean Something Different in Finance?

In the world of bond trading, TBA is used in particular to describe a situation when certain mortgage-backed securities are traded but the details of the securities are not announced until a later point in time. Buyers and sellers of TBA trades agree on a few necessary parameters such as issuer [maturity](https://www.investopedia.com/terms/m/maturity.asp), [coupon](https://www.investopedia.com/terms/c/coupon.asp), price, [par](https://www.investopedia.com/terms/p/parvalue.asp) amount, and settlement date. The specific securities involved in the trade are announced 48 hours before the settlement.

## What Is the Difference Between TBA and TBD?

Outside of the MBS market, 'to be announced' and 'to be determined' are often used interchangeably and mean the same thing. More technically, TBA (i.e., a pending announcement) should occur after something has already been determined, so that it will always follow a TBD status. For instance, a company may ponder whether to acquire a company—rendering it TBD. Once that decision has been approved, the status may move to TBA until it has been officially announced to shareholders.

## When Are MBS Trades Described As TBA?

A to-be-announced (TBA) trade is effectively a contract to buy or sell mortgage-backed securities (MBS) on a specific date. It does not include information regarding the pool number, the number of pools, or the exact amount involved in the transaction, which means the underlying mortgages are not known to the parties. This exclusion of data is due to the TBA market assuming that MBS pools are more or less interchangeable. This interchangeability helps facilitate trading and liquidity.

## The Bottom Line

The TBA market plays a crucial role in enhancing the liquidity and efficiency of the mortgage-backed securities (MBS) market by allowing loans with similar characteristics to be bundled and traded as contracts without detailed pool information.

While these trades provide significant benefits, including allowing mortgage lenders to hedge their origination pipelines, they also pose notable risks such as counterparty default, especially during periods of market volatility. Investors engaging in TBA trades should be aware of these risks and may benefit from collateral arrangements to mitigate potential defaults. Understanding the mechanics and risks of TBA trades is essential for professionals involved in the MBS market.  

> **Article Sources**
>
> 1.  Securities Industry and Financial Markets Association. "[TBA Market Fact Sheet](https://www.sifma.org/wp-content/uploads/2011/03/SIFMA-TBA-Fact-Sheet.pdf)."
>     
> 2.  Securities Industry and Financial Markets Association. "[TBA Market Fact Sheet](https://www.sifma.org/wp-content/uploads/2011/03/SIFMA-TBA-Fact-Sheet.pdf)." Page 2.
>     
> 3.  Securities Industry and Financial Markets Association. "[TBA Market Fact Sheet](https://www.sifma.org/wp-content/uploads/2011/03/SIFMA-TBA-Fact-Sheet.pdf)." Page 1.
>     
> 4.  CME Group. "[Understanding 30-Year UMBS TBA Futures and its Delivery Process](https://www.cmegroup.com/articles/whitepapers/understanding-30-year-umbs-tba-futures-and-its-delivery-process.html)."
>     
> 5.  WorldTimebuddy. "[Converting CST to EST](https://www.worldtimebuddy.com/cst-to-est-converter)."
>     
> 6.  Treasury Market Practices Group. "[Margining in Agency MBS Trading](https://www.newyorkfed.org/medialibrary/microsites/tmpg/files/margining_tmpg_11142012.pdf)." Page 1.
>     
> 7.  PwC. "[Mandatory Margin on TBAs: TBD, But Not for Long](https://www.pwc.com/us/en/financial-services/regulatory-services/publications/assets/fs-reg-brief-finra-rule-4210-tba.pdf)." _Regulatory Brief_, July 2014, pp. 1.
>     
> 8.  Financial Industry Regulatory Authority. "[FINRA Requests Comment on Proposed Amendments to FINRA Rule 4210 for Transactions in the TBA Market](https://www.finra.org/sites/default/files/NoticeDocument/p439087.pdf)." _Regulatory Notice 14-02_, January 2014, pp. 1-11.