Why Production Coupons Could Benefit & Happy B-Day to Butch Cassidy

Kirill Krylov and Steven Scheerer discuss how markets are digesting a recent energy-driven shock, with inflation pressures rising in the near term even as growth expectations begin to soften. They explore why this tension is keeping rates range-bound and how a potential decline in volatility could create a more constructive backdrop for MBS, particularly in production coupons. The episode also examines the growing role of property taxes as a structural driver of housing affordability and prepayment behavior across regions. Finally, they revisit the resurgence of adjustable-rate mortgages and explain how widening spreads versus fixed rates are making ARMs a practical affordability tool in today’s market.