MBS RECAP: Mixed Performance as MBS Slide While Treasuries Improve

Posted To: MBS Commentary

Treasuries were stronger today while MBS were mostly weaker. These days can happen, and they're all the more likely when a few key variables are present. Among those variables are Treasury auctions, big geopolitical risks, and the monthly MBS settlement process. Incidentally, all three of those are in play right now, but we're looking mostly at the after-effects from the MBS market's extra volatile adjustment process that took place in March (and that is still taking place to some extent). What needed to be adjusted? In not too many words, the existing infrastructure of available MBS coupons wasn't set up to handle the precipitous drop in rates that began after the Fed announcement in March--a problem that can be traced all the way back to the higher rates at the end of 2018...(read more)

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