Why mortgage bonds are set to deteriorate, and possibly hit the whole market, according to this Wall Str...

Billy Odell Tucker-Robinson Founder & Host — Banking With Billy Network • Intelligence Network • Data Science • AI Research • World News
Published: 2026-09-18T12:54:43.243Z • Permanent link

Harley Bassman, a renowned expert on mortgage-backed securities, has issued a stark warning about the deteriorating state of the mortgage bond market. Bassman, who serves as the head of mortgage research at Credit Suisse, has been closely tracking the market's trends and believes that the flattening Treasury yield curve is a major contributor to the problem. According to Bassman, the yield curve has been flattening since the onset of the pandemic, leading to a sharp decline in the value of mortgage-backed securities. Specifically, the 10-year Treasury yield has fallen to around 1.4%, down from its peak of 1.7% in 2020. This decline has resulted in a sharp decrease in the value of mortgage-backed securities, with some experts predicting that the market could experience a major correction.

Bassman's warning comes as the mortgage bond market continues to face numerous challenges. The Federal Reserve's decision to keep interest rates low has led to a surge in refinancing activity, which has put downward pressure on mortgage-backed securities. Additionally, the ongoing COVID-19 pandemic has led to a decline in economic activity, resulting in a decrease in housing demand and a subsequent decline in mortgage-backed securities. Furthermore, the rise of online lending platforms has disrupted the traditional mortgage market, leading to a shift towards non-traditional lending products that are often more expensive for consumers. All of these factors have combined to create a perfect storm that is putting pressure on the mortgage bond market.

Mortgage-backed securities are a critical component of the global financial system, with trillions of dollars in outstanding debt. The value of these securities is closely tied to the performance of the underlying mortgages, which are typically issued by banks and other financial institutions. When mortgage-backed securities begin to decline in value, it can have a ripple effect throughout the entire financial system. For example, if a major bank were to experience a significant decline in the value of its mortgage-backed securities, it could lead to a loss of confidence in the institution, resulting in a decline in deposit rates and a credit crunch. As such, Bassman's warning is a serious one, and it is essential that financial markets and regulators take immediate action to address the issues facing the mortgage bond market.

The deteriorating state of the mortgage bond market has significant implications for the global financial system. As mentioned earlier, mortgage-backed securities are a critical component of the system, and a decline in their value can have far-reaching consequences. For example, the decline in mortgage-backed securities has already led to a sharp increase in mortgage rates, making it more expensive for consumers to refinance their mortgages. This has resulted in a decline in housing demand, which has in turn led to a decrease in economic activity. Furthermore, the decline in mortgage-backed securities has also led to a decline in the value of the underlying mortgages, which can have a devastating impact on homeowners who are struggling to make their mortgage payments.

The decline in mortgage-backed securities also has significant implications for research communities and financial institutions. For example, the decline in the value of mortgage-backed securities has made it more challenging for researchers to conduct studies on the subject. Additionally, the decline in the value of mortgage-backed securities has also made it more challenging for financial institutions to generate revenue from the sale of these securities. As such, it is essential that financial markets and regulators take immediate action to address the issues facing the mortgage bond market.

The deteriorating state of the mortgage bond market is part of a larger pattern of instability in the global financial system. In recent years, there has been a growing trend towards greater volatility in financial markets, with a decline in investor confidence and a rise in risk-taking behavior. This trend has been driven by a number of factors, including the ongoing COVID-19 pandemic, the rise of online lending platforms, and the decline in interest rates. Furthermore, the decline in interest rates has also led to a decline in the value of bonds, including mortgage-backed securities.