Baird Fixed Income Insights: Convexity Pulse

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 M...

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...

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...

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 demand...

In this week’s Convexity Pulse, Kirill Krylov and Steven Scheerer finally reunite for the podcast’s long-delayed “50th” episode and discuss a mortgage market caught between elevated volatility and still-powerful carry dynamics. They examine how strong fixed income inflows, resilient refinance friction, and improving higher-coupon prepayment behavior continue supporting agency MBS despite rising Tr...

In this week’s Convexity Pulse, Kirill Krylov discusses how the mortgage market is transitioning from a volatility-driven environment toward one increasingly supported by carry, stable demand, and improving higher-coupon prepayment behavior. He examines the sharp rebound in gross agency MBS issuance while highlighting why net supply dynamics remain much tighter beneath the surface, particularly wi...

Kirill Krylov discusses how a more stable but directionless rate environment is shifting MBS returns away from volatility-driven spread tightening and toward carry and demand support. He examines the evolving role of GSE buying, highlighting a transition from a steady policy bid to a more opportunistic, price-sensitive backstop that stabilizes spreads. The episode also explores a notable shift in...

Kirill Krylov and Steven Scheerer discuss a more cautious near-term outlook for MBS as valuations remain tight and supply is set to increase against a backdrop of uneven demand. They explore how GSE buying behavior is evolving from a constant bid to a more conditional, price-sensitive backstop that stabilizes spreads rather than compresses them. The episode also examines the rollout of VantageScor...

In this week’s Convexity Pulse, Kirill Krylov discusses how improving technicals, declining volatility, and strong performance in production coupons are shifting the return profile in MBS from spread compression toward carry. He highlights the evolving demand landscape, with banks moderating as valuations tighten while asset managers and foreign investors begin to re-engage. The episode also explo...

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 exa...

Kirill Krylov and Steven Scheerer discuss the evolving technical backdrop for agency MBS, including continued support from GSE portfolios and renewed demand from banks. They also examine how market stability has benefited from the absence of forced selling. The episode concludes with a discussion of changes to the VA loss mitigation waterfall and the potential impact on Ginnie Mae prepayment speed...

Kirill Krylov and Steven Scheerer discuss the growing risk of a stagflationary macro environment as energy prices rise and the yield curve continues to flatten. They revisit their bank demand outlook and explain why changing capital rules and improved regulatory clarity could bring banks back as a meaningful long-term buyer of MBS. The episode also explores the proposed Road to Housing Act and how...

Kirill Krylov and Steven Scheerer discuss widening mortgage spreads amid rising Treasury yields and a Fed that remains firmly in wait-and-see mode. They examine the persistent U.S. housing shortage and the growing impact of mortgage rate lock-in on market turnover. The episode then dives into the classic New York specified pool story, explaining how the state’s mortgage recording tax and CEMA refi...

Kirill Krylov and Steven Scheerer review February’s prepayment report and explain why refinancing activity is increasingly concentrated in the higher coupons of the stack as modest rate rallies begin to test refinance thresholds. They then explore the growing importance of appraisal waivers, or Property Inspection Waivers (PIWs), and how removing the traditional appraisal bottleneck is subtly chan...

Kirill Krylov flies solo today to examine the market implications of escalating geopolitical tensions along with renewed volatility and what that could mean for mortgage spreads and GSE purchase activity. He breaks down the powerful technical backdrop created by record fixed income inflows and increased retained portfolio flexibility at Fannie and Freddie. The episode then turns to proposed MSR ca...

Kirill Krylov and Steven Scheerer unpack a January housing slowdown driven more by weather and normalization than structural weakness, while highlighting a meaningful shift in buyer leverage and rising discounts off list prices. They then turn to household balance sheets, where climbing credit card delinquencies reveal a growing K-shaped dynamic that could dampen refinancing behavior in higher-cou...

Kirill Krylov and Steven Scheerer examine the strong fund inflows seen in January, the rebound of active inflows vs passive at the end of the month, and how flows may be an indicator of MBS investors increasingly viewing GSE MBS buying not as a one-off program, but as part of a broader policy backstop. They highlight the risks of policy-driven spread tightening, and how GSE reform goals collide wi...

Kirill Krylov and Steven Scheerer revisit the surge in GSE MBS buying and explain why its apparent success may create longer-term challenges for housing supply, mortgage rates, and GSE reform. They examine how shifts in Fed leadership and balance sheet philosophy could keep mortgage rates sticky even as policy rates ease, and why predictability matters more than low rates for housing liquidity. Th...

Kirill Krylov and Steven Scheerer address fears that GSE MBS buying could crowd out private investors, and explain why the data instead point to strong demand with a meaningful shift from active to passive flows. The episode also tackles the institutional investor executive order, rising political and inflation uncertainty, and a housing market caught between improving buyer interest and stubbornl...

Kirill Krylov and Steven Scheerer explore the tighter spreads in MBS post GSE purchase announcement, and why some investors are now hesitant to board the “government train.” They dive into where that demand is likely to land across UMBS, Ginnies, and structured products, and why execution, hedging, and net supply constraints matter as much as the headline. The episode also covers rising policy ris...

Kirill Krylov and Steven Scheerer break down the large-scale GSE MBS buying program announced last week and why a fast, visible policy fix may carry meaningful second-order consequences for market structure, supply, and long-term affordability. They highlight 2025’s historically low net MBS issuance and record-high CMO activity. The episode also tackles why banning institutional homebuyers is unli...

In the first Convexity Pulse of 2026, Kirill Krylov kicks off the year assessing an MBS market that looks rich after a historically strong 2025. He walks through why spreads are tight across coupons and vintages, why inflows still matter more than valuations alone, and why investors will require deeper pool-level and out-of-index strategies in the year ahead. The episode also examines shifting hou...

In the final Convexity Pulse episode of 2025, Kirill Krylov and Steven Scheerer explore three themes shaping the 2026 MBS outlook: the quiet return of GSE buying, the growing policy debate around whether Fannie and Freddie should support construction lending, and the steady role of money managers as the market’s center of gravity. They discuss how recent FHFA actions have reopened retained portfol...

Kirill Krylov and Steven Scheerer break down one of the biggest structural developments in years: Freddie Mac’s new Loan Level Directed Collateral platform and how it reshapes the design of REMIC collateral from the ground up. They explain how LLDC allows dealers to deconstruct pools and rebuild pseudopools at the loan level to target specific credit, seasoning, geographic, and convexity features...

In this post-Thanksgiving special edition of the Convexity Pulse, Kirill Krylov is serving up the 2026 Agency MBS outlook that the team has been preparing alongside our holiday roasts. He breaks down the expected rise in gross mortgage supply, the restrained path for net supply, and the broadening demand picture across GSEs, banks, REITs, ETFs, and asset managers. Taken together, these forces poin...