SVB Episode Highlights Rate Directionality of MBS, Barclays Says

The growing crisis at Silicon Valley Bank has driven spreads wider this week and while there’s probably limited room for contagion, it does highlight the inherent rate directionality of MBS in a way that was not obvious before, write Barclays analysts Michael Khankin and Pratham Saxena in a March 10 research report.

• Event raises a number of questions and while jarring, analysts view this as a one-off event specific to SVB
• Rationale for the sale “seems a likely recognition of the fact that liabilities will remain short, contributing to frictions for potential duration hedging of existing AFS assets, and a ...