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    Mortgage Risk On The Rise

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    CreditTrader
    While mortgage rates are sliding, we thought a look at the actual risk premium (over swaps and TSYs) would be useful in this ZIRP world. Page 2 red-line is interesting (as QE ended). Some interesting moves in relative risk premia here - even as TSYs have screamed lower and 2s10s has flattened

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    Mortgage Risk On The Rise

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    CreditTrader
    32 views2 pages
    While mortgage rates are sliding, we thought a look at the actual risk premium (over swaps and TSYs) would be useful in this ZIRP world. Page 2 red-line is interesting (as QE ended). Some interesting moves in relative risk premia here - even as TSYs have screamed lower and 2s10s has flattened

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    Mortgage Risk on the Rise

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    While mortgage rates are sliding, we thought a look at the actual risk premium (over swaps and TSYs) would be useful in this ZIRP world. Page 2 red-line is interesting (as QE ended). Some interesting moves in relative risk premia here - even as TSYs have screamed lower and 2s10s has flattened

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    32 views2 pages

    Mortgage Risk On The Rise

    Uploaded by

    CreditTrader
    While mortgage rates are sliding, we thought a look at the actual risk premium (over swaps and TSYs) would be useful in this ZIRP world. Page 2 red-line is interesting (as QE ended). Some interesting moves in relative risk premia here - even as TSYs have screamed lower and 2s10s has flattened

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
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    of 2

    2 3

    Mortgage Spread Return as %age of Total Return


    Regime Change in
    Ratio of MTG to 10Y TSY Mortgage Risk
    1.8
    Absolute Spread (%) (RHS)
    2.5
    1.6

    1.4
    2

    1.2

    1 1.5

    0.8

    1
    0.6

    0.4
    0.5

    0.2

    0 0
    Dec-84 Dec-89 Dec-94 Dec-99 Dec-04 Dec-09
    180% 2.5
    Mortgage spread (over swap) as %age return of total MTG return
    Ratio of 10Y Swap to 30Y MTG
    160%
    Absolute Spread (10Y Swap to 30Y MTG) (%) (RHS)
    2
    140%

    120%
    1.5
    100%

    80%
    1
    60%

    40%
    0.5

    20%

    0% 0
    Nov-88 Nov-93 Nov-98 Nov-03 Nov-08

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