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Weekly Market Summary
Nov 24 to Nov 28, 2025
Extra Credit*
- Mortgages are on pace to outperform corporates for the first time since 2018, with a year-to-date excess return of 114 basis points (bps) versus 54 bps, respectively. Almost all of this Mortgage-Backed Securities (MBS) outperformance occurred in August and September. The labor market this summer narrowed the Fed's path, forcing implied volatility sharply lower to early-2022 levels and reducing MBS option costs.
- Unlike during a similar episode in mid-2024, risk assets continued to rally, with Quantitative-Easing-sized AI investments in the economy offsetting headwinds from higher tariffs, policy uncertainty, and employment concerns. At the same time, a slight increase in Government-Sponsored Enterprise (GSE) activity in September fueled market speculation about the potential for non-economic buying to drive down mortgage rates—or, at a minimum, for the FHFA to grant enterprises greater freedom to expand their balance sheets and potentially become buyers of last resort, similar to the pre-GFC period. This left mortgage option costs and OAS at the tight end of the post-2022 range.
- MBS technicals will remain challenging next year, despite broad consensus for modest improvement in bank and overseas demand and widespread expectations for GSEs to ramp up portfolio buying.
Morningstar, as of 11/26/25.
Previous reports
*Source: Morningstar®, Bloomberg, Credit Suisse. OAS is Options Adjusted Spread. 4-year discount margin is used for spread for bank loans. Yield quoted is yield-to-worst or equivalent calculation. YTD Low / High for yields are based on end of week and not intraday movements. Indexes and sub-indexes: Investment-grade corporates represented by Bloomberg US Corporate Bond Index. High-yield bonds represented by Bloomberg US Corporate High Yield Index. Bank loans represented by Credit Suisse Leverage Loan Index. The red and green arrows depicted under Yields, Option Adjusted Spreads, and Prices indicate a higher or lower value from the previous week.
Past performance does not guarantee future results. Index performance is not indicative of fund performance. Indexes are unmanaged and it is not possible to invest directly in an index.
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