How Are Mortgage-Backed Securities Hedged?
Updated 17 days ago (March 6, 2026)
MBS cannot be hedged directly, but can be indirectly hedged by conducting refinancing for the constituent mortgages when interest rates fall to incur a lower interest rate for those mortgages. This lower interest rate will ultimately lead to lower financing costs moving forward. Refinancing in this manner allows originators of MBS to hedge their mortgage pipelines against interest rates shifts.
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