business / news / / The Economic Times
Rising Treasury yields are forcing investors to sell government debt.
Recent convexity hedging activity by MBS investors has significantly amplified Treasury market volatility.
KEY POINTS
- CME data revealed exceptionally large block trades in five- and 10-year Treasury futures linked to MBS hedging.
- The Fed's QT policy shifts mortgage-related convexity risk from its balance sheet to private investors.
- Higher-coupon mortgages exceeding $2 trillion have increased mortgage market sensitivity to rate swings.
- Convexity hedging flows are now a larger driver of Treasury volatility than in past years.
COMPANIES
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