Fall Blend: Pumpkin Spice and Rate CutsThe third quarter marked a reversal from the first half of the year, as longer-duration and higher-quality sectors outperformed shorter-duration and lower-rated cohorts, driven primarily by falling Treasury rates. The long-anticipated start of the interest-rate cutting cycle by the Fed in September contributed to lower Treasury rates across tenors in the period, as the two- and 10-year yields declined 111 bps and 62 bps, respectively. Securitized and corporate credit spreads broadly tightened, and credit curves flattened. Yields across the securitized products market remain attractive, driven in part by wider than average spreads. Spreads for many securitized subsectors remain wide of their 10-year averages, with Agency MBS and non-Agency CMBS exhibiting the largest percentile differential.
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