Since the DoubleLine Agency Mortgage-Backed Securities team published our last update on the Agency mortgage-backed securities (MBS) market in May (The Case for Agency MBS), spreads experienced year-to-date wides with the current-coupon Agency MBS spread to five-year and 10-year U.S. Treasury yields reaching a high of 194 basis points (bps) on May 29. Subsequently, Agency MBS tightened in June and July, with the current-coupon spread narrowing. The Bloomberg US MBS Index marked positive excess in June and July. Rate volatility reared its head, however, in August and September, causing mortgages to widen again, as the Bloomberg US MBS Index gave back the positive excess return of June and July, falling 33 bps in August and 81 bps in September, the second worst month of the year after March.
