Only ~2% of Mortgage Market Refinanceable at Prevailing Rates; Agency MBS Posted -3.38% in September, Fourth-Worst Month Since 2000
The mortgage market is structurally locked up. By quarter-end September 30, 2026, only approximately 2% of the mortgage market was refinanceable at prevailing rates. That suppresses prepayment risk across much of the coupon stack and reinforces the lock-in dynamic DoubleLine describes across residential credit broadly.
Agency MBS bore the brunt of Q3's rate move. The @business US MBS Index returned negative 4.25% for the quarter, underperforming Treasuries, which returned negative 3.04%. September alone was negative 3.38%, the fourth-worst monthly total return for Agency MBS since 2000.
The pressure was rate and volatility driven, not credit. Current-coupon spreads widened approximately 18 basis points during the quarter as markets adjusted to a higher path for interest rates.
@DLineCap notes the repricing improved the opportunity set. Higher yields, wider spreads and the 2% refinanceable market together reduce prepayment risk while improving carry and relative value versus corporate bonds. Agency MBS gross issuance is projected at approximately $1.3 trillion for 2026, with net issuance of approximately $164 billion.
The mortgage market is structurally locked up. By quarter-end September 30, 2026, only approximately 2% of the mortgage market was refinanceable at prevailing rates. That suppresses prepayment risk across much of the coupon stack and reinforces the lock-in dynamic DoubleLine describes across residential credit broadly.
Agency MBS bore the brunt of Q3's rate move. The @business US MBS Index returned negative 4.25% for the quarter, underperforming Treasuries, which returned negative 3.04%. September alone was negative 3.38%, the fourth-worst monthly total return for Agency MBS since 2000.
The pressure was rate and volatility driven, not credit. Current-coupon spreads widened approximately 18 basis points during the quarter as markets adjusted to a higher path for interest rates.
@DLineCap notes the repricing improved the opportunity set. Higher yields, wider spreads and the 2% refinanceable market together reduce prepayment risk while improving carry and relative value versus corporate bonds. Agency MBS gross issuance is projected at approximately $1.3 trillion for 2026, with net issuance of approximately $164 billion.