The U.S. MBS agency market had another bounce back outing in July, alternating good and bad months since the start of 2022. This time however, the sector employed a slightly different formula owing to the preponderance of lower and discounted coupons that still dominate MBS market share.
For the month, the MBS index gained +183bps versus the riskless Treasury index, and +121bps spread advantage. The main stack gainers were lower 30yr 1.5%s through 3.5%s, with belly 4%s about flat, and fuller 4.5%s and above losing the most as rates rallies run contrary to shorter duration premiums.
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