Current coupon MBS has done reasonably well in the rally. Merrill shifted from an Overweight to a Neutral position on the basis. Especially with swap spreads on the tight end and rates at their lows, there is little reason to be overweight anything relative to Treasuries. In 30s, higher coupons have certainly underperformed, with 6s still the worst performer in the stack. The 6 coupon is on the cheaper side relative to 5.5s, which could stay so for a while with the Refi Index still rising and prepayments soaring. In 15s, currently overweight the sector vs. 30s.
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