Back in the early 2000s, the US rates markets were at the mercy of mortgage-backed securities (MBSs). The holders were active hedgers and as underlying rates moved, it led to a flood of trades that could have an impact on the markets underpinning them.
As these MBSs passed into the hands of passive, non-hedgers like the Fed post-2008 and then after the Covid pandemic, that effect dimmed. But as the Fed’s balance sheet runoff puts the bonds into new hands, combined with higher mortgage interest
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