The first Federal Reserve hike will probably trigger the unwinding of the MBS carry, an event that could lead to a major bear market-induced steepening, said Ifty Islam, head of U.S. fixed income strategy at Deutsche Bank. These remarks were made at a media briefing held last week.

The duration of mortgages is more sensitive to moves in interest rates compared to Treasurys, making the sector much more difficult to hedge.

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.