In this new era, trading mortgages has been challenging over the past year for investors due to a number of reasons. 

In particular, massive mortgage-backed securities purchases by the Federal Reserve have impaired liquidity and market depth while policy changes have made prepayments difficult to forecast because of changes to the Home Affordable Refinance Program and Federal Housing Finance Agency leadership remain uncertainties, JPMorgan Chase said in its latest report. 

Additionally, short rates have been anchored, rendering traditional measures of duration such as parallel rate shifts irrelevant, particularly for higher coupons, the banking giant noted.

“As a result of these factors, many inter-coupon relationships are no longer mean-reverting with the same frequency they exhibited in previous environments, and money managers therefore struggle to generate alpha using age-old methodologies such as regression analysis,” said analysts of JPMorgan ($48.86 -0.0179%).

Investors expect the 2-year note on higher coupons to remain anchored for some time, as the central bank continues to open-ended third round of quantitative easing, making the correlation between price and rate moves anemic.