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MBS Day Ahead: Are Mortgage Rates Done Closing The Gap To MBS?

Posted To: MBS Commentary

We've talked a lot about the massive rift that opened up between mortgage rates and MBS yields as the pandemic hit markets several months ago. MBS yield isn't something we've historically focused on largely because it's not important to follow for the purposes of our core audience. But apart from something like 10yr Treasury yields, it provides the least complex comparison between bond market movement and mortgage rates. While the comparison may be relatively simple, the thing itself is less so. If we're talking about the "current coupon" yield (which we need to be in order to examine longer-term relationships between MBS and rates), and given the lack of a liquid discount MBS coupon (i.e. nothing is actually trading under a price of 100.00, which is something…(read more)

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