4 ms·
Very simplistic analysis. Real yield is a function of inflation over the life of the bond. It might be 8% now, but the market is not pricing that over the next
by retube 4y ago
Very simplistic analysis. Real yield is a function of inflation over the life of the bond. It might be 8% now, but the market is not pricing that over the next 20 or 30 years.
And people buy MBS because they have a higher yield than treasuries.
- UncleEntity 4y agoOr perhaps the market knows that the official rate of inflation is nowhere close to the real rate of inflation and are pricing that in? Also, I saw an article the other day where the Fed is no longer buying MBS as part of QE <mark whatever> as of last month (I believe, could have been march) so a major buyer has left the market. A buyer who bought for no other reason other than to prop up the market I might add.
- pas 4y agohow does the market know what's the true inflation rate? if they use a sampling (basket of goods as proxy) method like other statistical agencies then why do we think the stats agencies are worse?