Posted To: MBS Commentary

Today's MBS charts initially made it seem like prices had fallen versus yesterday's latest levels. In a way, they did, but the right side of the chart pertains to MBS that will begin paying investors back one month later than the MBS referenced on the left side of the chart. It's that difference in the time value of money that accounts for the difference in prices. In fact, the time value of money would suggest a slightly bigger loss. In other words, MBS are are actually in positive territory. Why today? The roll . There are always several months' worth of MBS trading at any given time. When the "front month" (closest to delivery) is retired/delivered, the +1 month (or "back month") takes over as the new front month. The apparent drop in prices on roll day…(read more)

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Source: Mortgage News Daily