Prices of mortgage pass-through securities are:

Question

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Mortgage pass-through securities are bonds that pay interest and principal based on the schedule of the underlying mortgages. When interest rates rise, homeowners are less likely to refinance and prepay their mortgages. This means that the mortgage-backed securities become more valuable because they continue to pay out interest for longer. Conversely, when interest rates fall, homeowners are more likely to refinance and prepay their mortgages, reducing the value of the mortgage-backed securities. Therefore, prices of mortgage pass-through securities are less sensitive to declines in interest rates and more sensitive to increases in interest rates.

Prices of Mortgage Pass-Through Securities Are