Like Ogres and Onions, the Best Pools Have Layers

In this week's Convexity Pulse, Kirill Krylov and Steven Scheerer discuss why mortgage investors may be placing too much emphasis on day-to-day Fed expectations and too little on the structural forces reshaping agency MBS. They examine how benchmark evolution, growing foreign demand, and changing index composition are quietly altering the investment landscape, while rising homeowners insurance costs and regional affordability pressures create new layers of refinance friction and borrower behavior. The episode also explores why the strongest specified-pool opportunities increasingly come from risk layering, where first-time homebuyers, high-LTV borrowers, elevated DTIs, and other complementary characteristics combine to produce more durable call protection than any single borrower attribute alone.