Myth of Permanent Lock-In & Wine Cellar Theory of CMOs

Myth of Permanent Lock-In & Wine Cellar Theory of CMOs

In this week's Convexity Pulse, Kirill Krylov and Steven Scheerer discuss why today's mortgage market continues to defy simple narratives. They examine how shifting Fed expectations and persistent macro uncertainty are reinforcing the importance of disciplined security selection over broad directional bets. The episode also explores why "aging in place" may not permanently suppress housing turnover as many investors assume, why recent swings in GSE portfolio activity may say less about long-term demand than headlines suggest, and how the agency CMO market is evolving from broad valuation opportunities toward a more selective, collateral-driven environment.

3D Home Printing, Burnout, and the Future of Mortgage Supply

In this week’s Convexity Pulse, Kirill Krylov and Steven Scheerer discuss why technical factors continue supporting agency MBS, even as spreads approach fair value and investors become increasingly selective. They examine how intergenerational wealth transfers could decouple housing demand from mortgage production, creating a future where healthy home sales no longer translate into robust agency MBS supply. The episode also explores the real implications of 3D-printed housing for mortgage investors and explains why yesterday’s fastest-prepaying collateral may ultimately become tomorrow’s most compelling burnout opportunity.

Refinance Friction Zone of High DTI & Return of Convexity Hedging Monster

Every generation believes it is navigating unprecedented uncertainty. This week, Kirill Krylov and Steven Scheerer explore what that uncertainty means for mortgage investors today. The discussion covers a surge in bond fund inflows, renewed strength in agency MBS performance, and the increasingly constructive technical backdrop created by limited supply and delayed refinancing activity. The hosts then examine whether the "convexity beast" is beginning to wake up as higher-coupon collateral and shifting ownership dynamics bring mortgage hedging flows back into focus. The episode concludes with a look at rising borrower debt-to-income ratios and a new perspective on refinance risk. Rather than focusing solely on underwriting denial thresholds, Kirill and Steven argue that refinance flexibility may gradually erode long before borrowers encounter a hard underwriting wall.

Diminishing Returns of GSE Buying and an Extra Scoop of Amerihome Gelato

In this week’s Convexity Pulse, Kirill Krylov and Steven Scheerer discuss why volatility, rather than the outright direction of rates, may remain the most important variable for agency MBS investors as markets navigate a resilient labor market, geopolitical uncertainty, and an important upcoming inflation report. They examine whether the market is placing too much emphasis on GSE portfolio growth and not enough on the diminishing marginal impact of additional agency purchases, funding constraints, and the increasingly important role of private capital. The episode also explores a surprising specified-pool opportunity within AmeriHome collateral, where slower refinance responsiveness and correspondent-lending dynamics have created compelling relative-value opportunities across First-Time Buyer and low-loan-balance stories.

Future of OTM Speeds & The New Low Loan Balance Playbook

In this week’s Convexity Pulse, Kirill Krylov and Steven Scheerer discuss why agency MBS fundamentals remain more constructive than recent volatility would suggest, despite geopolitical uncertainty and seasonal supply pressures. They examine the growing role of non-rate-driven borrower behavior, including how retirement funding needs, rising housing costs, and increasing homeowner liquidity demands could reshape prepayment patterns in seasoned discount collateral and certain segments of Ginnie Mae MBS. The episode also explores Freddie Mac’s overhaul of low-loan-balance pooling practices and what the changes reveal about the evolution of specified-pool investing, prepayment modeling, and collateral differentiation in today’s mortgage market.