Rising Rates Aren't All Bad News for Mortgage-Backed Investors
- Disappointing new and existing home sales suggest less supply
- Production coupon agency MBS can benefit from lower issuance
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It’s not all bad news.
While rising rates may cause duration extension headaches for mortgage-backed security investors, premium coupons’ relative performance may be helped by slowing prepayment speeds. Production coupons, too, may see a boost due to less supply as home sales slow.