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Investors Hedge $40 B Treasury Risk as MBS Volatility Soars

6/5/2026

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Summary

Story summary

Investors increased convexity hedging of mortgage-backed securities, adding volatility to the $31 trillion Treasury market.
Goldman Sachs estimated the exposure now equals buying $40 billion of 10-year Treasuries.
Barclays reported that over $2 trillion of mortgage securities now carry coupons of 5% or higher, about four times the amount three years ago.
The Federal Reserve cut its mortgage-security holdings sharply after inflation surged, leaving $2.7 trillion to be hedged, which should boost market volatility.

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Story summary

Investors increased convexity hedging of mortgage-backed securities, adding volatility to the $31 trillion Treasury market.
Goldman Sachs estimated the exposure now equals buying $40 billion of 10-year Treasuries.
Barclays reported that over $2 trillion of mortgage securities now carry coupons of 5% or higher, about four times the amount three years ago.
The Federal Reserve cut its mortgage-security holdings sharply after inflation surged, leaving $2.7 trillion to be hedged, which should boost market volatility.