Posted To: MBS Commentary

Bonds are starting the day in decent shape with 10yr yields just slightly lower than yesterday's latest levels. The bigger story is MBS outperformance though. When compared to the typical Treasury benchmarks, MBS yields are lower than they've been in decades. What's a typical Treasury benchmark? We have spent vastly more time using 10yr yields for this purpose, but a blend of 5 and 10yr yields is generally a more appropriate comparison as MBS durations tend to consistently undershoot the 10yr time frame. The following chart shows how MBS yields (not prices!) have moved relative to 10yr yields. As you can see, they're within 20bps of each other. That's INSANELY tight considering 2012's record was over 40bps. In fact, it's so tight that it lets us know we need to look…(read more)

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Source: Mortgage News Daily