MBS RECAP: 10yr Nearly Tags All-Time Lows; Mortgage Market Laggin'

Yields plummeted overnight and again this morning, giving chase to a massive global stock market sell-off due to rapidly rising coronavirus fears. MBS did quite well on an outright basis, but lagged horribly behind Treasuries in terms of day-over-day gains. MBS and/or mortgage rates "lagging" the movement in the Treasury market is a blessing when Treasury yields are spiking, and actually also sort of a blessing when rates are falling--even though it might not seem like it at first glance. After all, don't we WANT mortgage rates to drop through the floor at as fast a pace as possible? Sounds great in theory, but in practice that causes all kinds of issues. Those issues, in turn, cause MBS valuations to take a hit. Those valuations, in turn, cause mortgage rates to move back up...(read more)

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