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Convexity Buying Amplifies Decline in U.S. Treasury Yields
The recent drop in U.S. Treasury yields is partly due to "convexity buying" by mortgage managers and insurers to hedge against negative convexity from mortgage refinancing, amplifying yield declines and tightening swap spreads; this is despite active MBS hedgers falling to 6% from 27% in 2002.
Convexity Buying Amplifies Decline in U.S. Treasury Yields
The recent drop in U.S. Treasury yields is partly due to "convexity buying" by mortgage managers and insurers to hedge against negative convexity from mortgage refinancing, amplifying yield declines and tightening swap spreads; this is despite active MBS hedgers falling to 6% from 27% in 2002.
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