Mortgage Backed Securities Vs Mortgage Rates

That s not true rates follow prices for mortgage backed securities mbs.

Mortgage backed securities vs mortgage rates.

A common misconception is that mortgage rates are set by the federal reserve. A discussion of mortgage backed securities and their affect on mortgage rates. This is known as negative convexity and is one reason why mbss offer higher yields than u s. They are always trying to guess when you might payoff your current mortgage.

This risk can be reduced by diversifying the maturities and characteristics of mortgage backed investments. In turn their prices tend to decrease at an increasing rate when rates are rising. However mortgage backed securities prices tend to increase at a decreasing rate when bond rates are falling. A blog featuring up to the minute commentary on mortgage rates and the mortgage backed securites markets.

Mortgage backed securities tend to be more sensitive to changes in interest rates than other bonds because changes in interest rates affect both the mortgage backed bond and the mortgages within it.