Mortgage investors grapple with negative swap spreads

Collapse of US swap rate creates problems for valuation models

Plunging US dollar swap rates are causing problems for investors in mortgage-backed securities

The inversion of US dollar swap spreads is disrupting the market for agency mortgage-backed securities (MBSs).

Rates for US dollar interest rate swaps are commonly used as an input into a model mortgage investors use to value and hedge agency MBSs. But the collapse of US dollar swap rates since last September has thrown a spanner in the works, breaking investors' hedge positions and creating uncertainty around valuations.

"For anybody who is blindly following a model it could lead to a

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