Treasury/MBS: damned if they don’t

Investing in mortgage-backed securities is not for the weak of heart. Such portfolios need constant tweaking – much more than holdings of normal bonds – to avoid big losses. Hedging by MBS investors has added to the ongoing selloff in longer-term US government bonds. Unfortunately, the rise in interest rates this has caused could hurt the housing market – and those MBS investors – even more. MBS investors aren’t principally to blame. Stronger-than-expected manufacturing and construction data re...