MBS RECAP: Yes, MBS Really Lost That Much Versus Treasuries

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Posted To: MBS Commentary

MBS lost 10 ticks today while 10yr Notes gained 1 tick. Times like this are uncommon, but they do happen. The perfect storm required for such things typically includes a massive bond rally (check) driven by unscheduled events like trade tweets (check), especially around the beginning of the month (check). The beginning of the month is an important qualifier because that's when the monthly prepayment speed report is issued. When speeds are in a state of flux due to a big market movement, investors are more cautious anyway (read: not paying as much as they otherwise might for MBS). If speeds are faster than expected, there can be outright panic reflected in MBS prices. But why do speeds hurt? Here are the bullet-point concepts intended to help make this esoteric concept more tangible: An…(read more)

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