In a recent report, Goldman Sachs compared the current mortgage market environment to that of the 1997 period. The firm believes the same factors were present during that time: actual volatility was subdued, implied volatility weakened steadily, and mortgages traded “rich” for a sustained period.

However, this time around, the story is reversed. In 1997-98, the storm of October 1998 ended the calm that preceded it. Today it’s the storm that has preceded the calm. Goldman notes that the recent July-August dislocation has now given way to a new trading range. Analysts examined whether this analogy could justify the current environment’s historically rich levels.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.