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 distortio
The week on Risk.net, September 8-14, 2018Receive this by email