While MBS prices began the month near all-time lows, a strong rally was observed by the end of the month. In particular, MBS prices closed at their highest level since March 2020.
Market analysts attribute this strong performance to the recent announcement of promising news related to the development of COVID-19 vaccines. The vaccine news helped buoy investor sentiment and push MBS prices upward. As such, mortgage rates saw an overall decrease during the period, which provided further fuel for the rally.
However, the market showed signs of slowing down in the second half of the month. This can be attributed to a number of factors, including mounting concerns over the U.S. election results, rising coronavirus cases, and speculation about additional fiscal stimulus measures. These worries weighed on MBS prices and caused them to drift lower.
In terms of activity, there was some buying activity during the month, but trading volume was relatively light overall. This can be attributed to a combination of high levels of uncertainty in the markets and low levels of liquidity. Moreover, many investors have been reluctant to commit funds into the volatile atmosphere, leading to a muted response from traders.
The outlook for mortgage-backed securities in December remains uncertain. While the promising news on vaccine developments could provide support to prices, the market is likely to remain volatile due to the numerous other factors mentioned above. It will be important to watch closely how the market reacts to these events in the near future.
The mortgage-backed securities (MBS) market experienced a volatile month in November 2020. Despite beginning the month near all-time lows, MBS prices surged higher and closed at their highest level since March 2020. This impressive rally was credited to positive news surrounding the development of coronavirus vaccines, which helped to buoy investor sentiment and push MBS prices up. This led to mortgage rates decreasing across the board, further fueling the surge in MBS prices.
However, the market soon began to slow down in the second half of the month. This can be attributed to rising levels of uncertainty surrounding the U.S. election results, increasing COVID-19 cases, and speculation about additional fiscal stimulus measures. These worries weighed on MBS prices, causing them to drift lower. Trading activity also decreased during the period due to high levels of uncertainty and a lack of liquidity.
The outlook for MBS in December is uncertain. On one hand, there is the potential for further gains as vaccine news continues to emerge. On the other hand, there are a plethora of uncertainties that could negatively impact MBS prices and propel the market towards volatility. Investors must pay close attention to how the market reacts to these events in the near future in order to determine how best to position themselves going forward.
This article was contributed on Nov 12, 2023