While investors might be tempted to hedge mortgages short in duration, JPMorgan Securities MBS analysts warned that the Federal Reserve might have inadvertently aggravated extension risk.

Fed buying shifted the TBA deliverable to longer WALA buckets: 25-30 for 5.5s. For example, if the market suddenly sells-off, the deliverable will shift to news WALA pools as they become the production coupon — and these "are significantly longer in duration" versus seasoned pools,  analysts said.

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