Baird Fixed Income Insights: Convexity Pulse
Sep 14, 2026 · 24 min · 11 segments
In this week’s Convexity Pulse, Kirill Krylov and Steven Scheerer discuss why broad agency MBS valuations remain relatively neutral even as opportunities beneath the surface become increasingly…
Kirill KrylovHost
Steven ScheererHost
Passive money continue providing an important bid for the larger index-weighted mortgage sectors.
But the interesting part this week is that the market itself isn't giving us especially strong strong broad valuation signal.
Most coupons underperform this week for sure as a result of sell-off, but a broad valuation, at least according to our regression, still looks in line with our neutral positioning.
The basis has widened from its three-month average, but volatility has increased and rates are higher.
Once we account for all of these factors, both the 30-year and 15-year current coupon mortgages are still sitting reasonably close to model fair value.
So I wouldn't describe this as a market where the broad basis is screaming either buy me or get out.
The better opportunities are underneath the surface as he said, where coupon performance and relative value have become much more differentiated.
Steven, next time basis scream to you or just talk to you in any way, like buy me or get out, do let me know.
Passive money continue providing an important bid for the larger index-weighted mortgage sectors.
But the interesting part this week is that the market itself isn't giving us especially strong strong broad valuation signal.
Most coupons underperform this week for sure as a result of sell-off, but a broad valuation, at least according to our regression, still looks in line with our neutral positioning.
The basis has widened from its three-month average, but volatility has increased and rates are higher.
Once we account for all of these factors, both the 30-year and 15-year current coupon mortgages are still sitting reasonably close to model fair value.
So I wouldn't describe this as a market where the broad basis is screaming either buy me or get out.
The better opportunities are underneath the surface as he said, where coupon performance and relative value have become much more differentiated.
Steven, next time basis scream to you or just talk to you in any way, like buy me or get out, do let me know.
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