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What are you going to do with MBS that aggregated averaged a yield of 1.5% when anyone can get a risk free bond returning over 3% now? Who’s going to buy your mortgages?

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This didn't happen all of a sudden -- it took place over months! Sure, now it's a pickle, but it didn't turn into a pickle from one day to the next.

You sell them at a discount of (duration * 3.x%-1.5%), so that the hold to maturity interest rate remains at the market rate of 3.x%

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