Fed’s MBS exit surprises some with muted rates vol
Shrinking of huge portfolio led to predictions of vol jump that – so far – has not appeared
For years, mortgage-backed securities (MBSs) were the tail that wagged the US rates dog. When rates moved up or down, hedging activity from investors noticeably moved the market and raised volatility.
Their impact lessened when the Federal Reserve built up a $1.8 trillion portfolio of agency MBSs after 2008. With that programme winding down and the bonds increasingly returning to the hands of
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