2. mbs are market-directional investment that should be avoided when one expect interest rates to __________.
So, everyone says fall.
But, when yields fall, the price increases but then levels off/falls due to the negative convexity. When yields rise, the price falls (but not as much as a corporate bond). So, is it really correct to say that you would avoid MBS if you expect rates to decrease? doesnt seem like you would buy them if rates were increasing. |