Preparing for the Fed’s Exit from the Mortgage Market: Yield Spreads
ByPosted To: MBS Commentary
The Federal Reserve's MBS Purchase Program comes to an end today. Mortgage market participants must now face the reality of a life without the supportive, flow balancing, volatility calming bid of the Federal Reserve. It's time to ensure everyone's knowledge base is adequately prepared to explain some of the factors that will be moving mortgage rates over the next few days, weeks, and months. Without going into servicing valuations and best execution options, mortgage rates are generally dependent upon the mortgage basis. The mortgage basis can be generally thought of as a guidance giver for mortgage rates. This requires a proper explanation of yield spreads…. Debt issued by the US Government (Treasury bills, notes, and bonds) is considered to be the highest credit quality……(read more)