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During this time of rapid and drastic market changes, we believe that it is important for long-term investors like financial institutions to be patient and remain calm. Liquidity was very poor last week and realized volatility for US Treasuries and Mortgage Backed Securities (MBS) has been historically high. In general, now is NOT the time to sell quality assets. However, this is the time for financial institutions to remain diligent and make sensible and timely decisions.

As global policymakers continue to provide support to aid market functionality, COVID-19 is affecting the mortgage market dramatically with lockdowns delaying loan closings and potentially impacting MBS supply and prepayments. Discussions of mortgage payment delays are also sparking concerns for real estate investment trusts and other participants, while large loan originator refinance rates have spiked to close to 5% for 30-year loans.

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