There is relative value in the 15-year sector versus 30-year MBS, said FTN Financial analysts in a report that examined 15-year performance under different market scenarios.

In the bond market rally of the past six weeks, 30-year MBS has outperformed 15-year paper by as much as 6/32s, analysts said. And despite some profit taking seen more recently, 15-year paper remains cheap by about four basis points, according to the firm's models. Analysts noted that 15-year paper is cheap to 30s across the coupon stack, but the current coupon swap (30-year 6s/15-year 5.5s) is rich by 10/32. Meanwhile, OAS analysis is also used to compare 30s to 15s, and after lagging 15-year paper through late last year and early this year, 30-year 6s have pushed tighter and remained tighter compared to 15-year 5.5s with a more noticeable divergence in LOAS since mid-July.

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