MBS RECAP: Late December Liquidity Causing Volatility

 · Did risky mortgage lending cause the financial crisis? No.. A liquidity crunch or bank run, in which financial institutions all wanted to sell their long-term assets in order to pay off short-term. And pools of mortgage-backed securities made to low and moderate-income borrowers or in low or moderate-income areas were attractive as CRA.

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When the economy heats up, bond price drop, and rates. mortgage rates today, April 1, 2019, plus lock recommendations | Mortgage Rates, Mortgage News and Strategy – The Mortgage Reports. MBS RECAP: Late December Liquidity Causing Volatility developed market liquidity conditions, likely to slowly advance in 2018, will likely present a headwind.

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Higher volatility and increased market sensitivity to potential prepaid speed increases gave rise to spread widening between the yield in our agency MBS and the cost of our hedges during the.

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Certain factors that could cause actual results to differ materially. Owing to the positive convexity, Fannie Mae DUS pools bested agency MBS late in the third quarter when interest rate volatility.

From late December through period end, the price of government securities then rallied strongly after the Federal Reserve signaled the case for raising policy rates had weakened and that it would be patient in assessing the need for further rate hikes. This caused Treasury rates to decline and MBS spreads to tighten, with agency MBS outpacing

A wide variety of products were offered including vanilla and complex options on MBS spreads and the Treasury yield curve. To help clients more fully appreciate Volatility as a primary risk vector, he created the MOVE Index. Similar in form to the VIX Index, it is now the recognized standard measure of Interest Rate Volatility.

This post is equal parts critique (of the over-democratization of markets), recap (of the bond rally and its reversal) and in-depth analysis (of the mechanics behind recent action). The late-March.