MBS market in much better shape versus October 2023

The key market theme in recent weeks has been the accelerating selloff in long-end rates. With 10-year UST yields surpassing the October 2023 peak, mortgage and structured product investors are increasingly drawing comparisons with the volatile market conditions of 2022-23. While current coupon MBS OAS has widened as Treasury yields have backed up, it remains well below the 55bp+ levels reached in 2023. For a number of reasons, MBS markets are in meaningfully better shape than during the October 2023 selloff: the macro and volatility backdrop is considerably less challenging; investor portfolios are better positioned for rising rates through allocations to higher coupons, shorter duration, and/or floating rate cashflows; demand has been broad-based and relative value versus tight IG corporate spreads remains supportive;