The difference in price between the front month and back month in a mortgage-backed security (MBS) dollar roll trade. A dollar roll is a popular type of trade in the MBS pass-through TBA market.

According to forward securities pricing theory, the front month price should be higher than the back month price. The drop is a function of current short-term interest rates, prepayment estimates, and the supply and demand for pass-throughs in the current delivery or front month.


A pass-through TBA security is said to be trading through fail when the drop is larger than what it would cost a mortgage originator, investor or securities dealer to fail to deliver into a TBA contract for an entire month. When there is a shortage of supply or extreme demand for a TBA security in the current delivery month, the drop can increase to fail or larger, reflecting the fact that securities dealers would rather roll a trade out an additional month at a large drop or fail to deliver that security for an entire month than make delivery in the current month.

  1. Dollar Roll

    A type of repurchase transaction in the mortgage pass-through ...
  2. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  3. Pass-Through Security

    A pool of fixed-income securities backed by a package of assets. ...
  4. Forward Price

    The predetermined delivery price for an underlying commodity, ...
  5. To Be Announced - TBA

    A term used to describe a forward mortgage-backed securities ...
  6. U.S. Savings Bonds

    A U.S. government savings bond that offers a fixed rate of interest ...
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