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MBS Week Ahead: Moderate Calendar Ahead; Bonds Start Strong; What's Up With the MBS Chart?

Posted To: MBS Commentary

The new week begins with "the roll" for 30yr UMBS–our in-house term to refer to the monthly settlement process for MBS coupons, and a perennial source of confusion for those trying to make sense of the chart on roll day. Reason being: today's chart, for instance, makes it seem as if MBS prices are lower than those on Friday. But today's chart is not "apples to apples." The left side (Oct 9) is the now-retired October 2.0 UMBS coupon while the right side (Oct 13) is the November coupon (now the most current month available to trade). November coupons were ALWAYS trading at lower prices than October coupons due to time value of money. Specifically, if you bought an October coupon on Friday, you'd get your first payment a month sooner than if you bought a November…(read more)

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