MBS RECAP: More Stock Market Interdependence; MBS Outperform

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Posted To: MBS Commentary

On a few occasions during the past few weeks, I've brought MBS underperformance to your attention. Specifically, MBS and mortgage rates hadn't been improving as robustly as Treasuries since yields topped out back in mid-February (or again on March 21st). A chart of Treasury yields vs mortgage rates shows Treasuries steadily declining (even if the pace is "moderate" at best) while mortgage rates have been essentially flat. Today, the show was on the other foot. 10yr yields rose more than 5bps throughout the domestic session as the stock market staged yet another comeback. During the same time, MBS loss less than 5/32nds in price. Or, in terms of apples to apples, 10yr Treasury PRICES fell 6/32nds today while MBS prices only fell 2/32nds day-over-day. The discrepancy is even…(read more)

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