That imposes an obligation on each mortgage bank to keep a suitable margin to the limits and avoid a race to the bottom. Bonds with the option of maturity extension – including if the interest rate trigger is activated – are gradually becoming the market standard as short-term bonds are refinanced.
Experience from the auctions shows that demand remains high – investors have accepted the new market standard. As we had expected, they do demand a modest excess yield of a few basis points, but they still bid heavily at the auctions, where bid-to-cover ratios were high in August and September.