Mortgage investors grapple with negative swap spreads
Collapse of US swap rate creates problems for valuation models
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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