Risk premiums on new agency mortgage bonds tightened significantly after a decisive victory in the recent election, with the market seen as unusually cheap prior to the event.

Fannie Mae current coupon mortgage-backed securities (MBS) yields relative to Treasuries narrowed to 1.45 percentage points, down from 1.47 percentage points the previous day. In response, Treasury yields increased as investors turned their attention back to inflation bets. This rise in long-term yields typically indicates higher mortgage rates, which could result in a decline in refinancing activity.

The overall market sentiment is shifting positively, benefiting not only mortgage bonds but also U.S. equities and the dollar.