Daily Update | After Market Close 9 March 2010
Mortgage bonds had their monthly coupon rollover after the close of trading today. The effect of this rollover was minus 34bp points for the 4.5% coupon. Therefore, while the bond quote for today shows minus 19bp, the minus 34bp rollover adjustment must be accounted for. This means that pricing actually closed up 15bp on the day.
What is a Bond Coupon Rollover?
Every month the coupon “rolls over”. In this case, this month’s coupon is closed out and all new loans are placed into next month’s coupon. There is no effect on rate sheets or pricing.
Think of it as the time they mature. The recently closed issue, loans that are satisfied 30 years from now, are packaged and sold. Because the seller or wholesale lender now has an additional 30-days, it is like having a 30-day extension on their rate lock.
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