Time to short the U.S. 10-yr

Refinancing waves in fixed-rate mortgages have the habit of pushing rates sharply lower. When the refi wave ends, the same mechanisms work in reverse to propel rates higher. Here I plot my favorite timing indicator for shorting rates (Primary Dealer MBS positions adjusted for mortgage duration) against a measure of the 10-yr Treasury risk premium. Now may be the time to start thinking about shorting the ten-year.