Agency MBS Weekly: Downs and Ups: turning basis underweight, an improving Florida housing market

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Agency MBS Weekly: Downs and Ups: turning basis underweight, an improving Florida housing market

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Agency MBS Weekly

Downs and Ups: turning basis underweight,

an improving Florida housing market

Commentary: a big week of weakness, a slight Fri rebound 24 July 2026

The markets are refusing to take summer vacation as this week proved one of the more Securitized Products Strategy

active in recent memory. Most rates and spread products saw negative performance as United States

geopolitical tensions escalated and oil prices surged to new local highs. The Treasury Jeana Curro

market sold off considerably, with the 10yr touching 4.70% midweek, although some of MBS Strategist

that reversed Friday. Fed hike expectations rose, although base case is still no change at BofAS+1 646 855 9135

next week’s FOMC. MBS underperformed across the entire stack. On Thursday, we jeana.curro@bofa.com

turned basis underweight from neutral at 113bps in anticipation of a gradual leak wider. Chris Flanagan

FI/MBS/CLO Strategist

Short-term basis underweight, from neutral (7/23/26) BofAS+1 646 855 6119

christopher.flanagan@bofa.com

Basis spreads have started to slowly leak wider and we expect this trend can persist on

the combination of 1) the worsening geopolitical environment, 2) an underweight PratikCLO/MBSK. GuptaStrategist

duration outlook, 3) extension risk fears, 4) continued rich valuations, and 5) the absence BofAS

+1 646 855 9146

of any real programmatic buying. As such at 113bps we are turning basis underweight, pratik.gupta@bofa.com

from neutral. Over the longer term, a buy on dip opportunity may emerge but the risks Ge Chu, CFA

appear elevated in the shorter term. In the below, we elaborate on all factors influencing MBS Strategist

BofAS

our bearish basis call.