For the first question, I forgot what the actual question was, but saved the explanation which I found confusing. Here it is: An increase in the spread and/or Treasury rate will likely increase the yield of the mortgage security, and this will tend to make the security’s convexity more positive. Why will increase in the spread and/or Treasury rate increase the yield of a mortgage security? What is the relationship between the change in the spread and/or Treasury rate and the yield of the mortgage security? I had a feeling they were independent and thats why we don’t hedge spread risk to take advantage of this characteristic. I know this is probably a basic FI question, but for some reason, I am blanking out on this.
it increases because for mortgage security we need premium on t-rate so if t-rate increases, mortgage yield increases.