This risk can be reduced by diversifying the maturities and characteristics of mortgage backed investments.
Mortgage backed securities vs mortgage rates.
A discussion of mortgage backed securities and their affect on mortgage rates.
30 yr frm 3 05 15 yr frm 2 68 jumbo 30 year fixed 3 40 mbs prices.
A common misconception is that mortgage rates are set by the federal reserve.
That s not true rates follow prices for mortgage backed securities mbs.
In turn their prices tend to decrease at an increasing rate when rates are rising.
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.
However mortgage backed securities prices tend to increase at a decreasing rate when bond rates are falling.
This is known as negative convexity and is one reason why mbss offer higher yields than u s.