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MBS Day Ahead: Visualizing The Drama And The Comeback in Mortgages

Posted To: MBS Commentary

It's no secret that volatility has been a big deal in the bond market (and most other markets) recently. But there's no comparing the drama seen in Treasuries to the utter chaos in mortgage bonds. Well actually, there is. We can certainly COMPARE the two, but when we do, it's easy to see just how different they've been. We did this yesterday with a chart of MBS yield spreads vs 10yr yields. That's meaningful for some market watchers, and it tells a story if you understand what you're looking at, but we can make things even more simple with today's chart. It's much simpler. The 10yr yield is plotted normally. The MBS prices are inverted (i.e. the higher prices are at the bottom of the y-axis and vice versa). This allows us to observe the typical correlation in...(read more)