The bloodbath last month in the mortgage-bond market points to what the future may be like without Federal Reserve hand holding. Investors are now wondering if anyone will step in to stop the bleeding. Returns on mortgage-backed securities in October lagged Treasuries by 37 basis points, the most since November 2016, when rates surged in the aftermath of President Donald Trump’s surprise election. Last month’s weakness coincided with the Fed ending its mortgage purchases as it winds down the $1.7 trillion MBS portfolio it amassed since the financial crisis to support the market.
