BIS paper finds close link between MBS and bond yields
Authors point to transient and 'hump-shaped' feedback effects
Mortgage-backed securities (MBS) and bond yields display feedback effects in the US, according to research published on December 14 by the Bank for International Settlements.
The working paper, Mortgage Risk and the Yield Curve, by Aytek Malkhozov, Philippe Mueller, Andrea Vedolin and Gyuri Venter, models how the duration of MBS and sensitivity to changes in interest rates can create a feedback loop. In the US at least, MBS makes up a sizeable chunk of fixed-income markets.
Because some amount
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