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2s30s Surge Once Again As Investors Bail On Long-End, Mortgage Spread At 52 Week Tights
Today's action is more of the same: aggressive selling on the far end of the curve has pushed the 2s30s to steep to quite steep levels yet again.
In the meantime, the Mortgage spread is down to 64 bps, a 52 week, if not all time tight spread. Soon the Fed's purchases of MBS will make the mortgage market "safer" than 10 years. The 30 year MBS is already trading well inside of comparable Treasuries. So beside the constant and unrelenting market insanity, all is normal.
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Who thinks we will still have The Fed in 2020? Anyone think they can keep the ponzi pump primed for another decade?
Imo beat the long bond like a rented mule...
http://whiskeyandgunpowder.com/theyre-going-to-kill-the-fed/
Why don't they just have FNM & FRE offer zero interest for the next 5 years? Hell, we've already backstopped them to the moon.
I just can't wait for FHA to implode.
Will they be able to get it past the midterms? I say yes.
Do they want to get it past the midterms?
just goes to show the Fed's purchases of MBS have no subtlety - they just set a price and an amount and start buying, fuck spreads, who cares if they are buying at insane levels, they can just print more.
I am telling you people, look to the MBS market, and get the fuck out of USD. It really doesn't matter where you put your wealth, just get it out of USD (and other fiats as they are forced to chase us down the rabbit hole). Oil, gold, copper, iron ore, sugar, coke, whores, it doesn't matter, just do not store your wealth in a bank earning nothing, you are going to get fucking creamed.
Good points all. Folks, this is the biggest subsidization of losses to taxpayers in the history of man. And... it... just... keeps... getting... bigger. With every newly planned MBS purchase, you might as well just transfer the losses to an increase in the deficit and even more Treasury financing.
Smart bond investors are beginning to catch on. What is the message?
The message is simple Agencies = Treasury debt... it's essentially guaranteed debt with the full faith and credit of the US taxpayer. If agencies are guranteed to principal and interest, so are Agency MBS.
Anyone who has a Fannie or Freddie loan can stop making those payments, you will likely be able to negotiate much better terms than the HAMP crap going forward.
If this indeed is the direction, the USD is toast. My hope is that it goes out of control sooner rather than later.
Can someone explain in more detail how that graph of the negative 30yr / mtg spread is generate? is that a bberg function or did ZH make that graph? What exactly are the two components of the spread (in more detail, I mean)?
I will give it a shot. I believe it is the spread between the 30 treasuries and the 30 years mortgage. If this is the case,then I guess this is net of dealer's profit,since mortgage rate today was %4.85 vs 4.67%for 30s.
"constant and unrelenting market insanity, all is [new] normal."
The bailouts you guys are referring to are backing the loans of the guys you work with, work for etc. Fannie/Freddie/FHA loan book is composed of the loans backing middle class households. We are backing our currency. Our work, future income, blood, sweat etc.
Stop thinking us vs them etc. It's just US. It's not Congress, Wall St, the Chinese etc. American's bought too much, borrowed too much and we will pay the price for at least a decade. The "home debtors" with 100-125% loan to value mortgages working their asses off for their past spending and mistakes. You know all the government loan programs allow for 125% mortgage "reflief refinances" right? Because the mortgage balance is so far above the current value. 30-35% of current homeowners with mortgages owe more than their place is worth. About 20% of homes don't even have a mortgage. Do the math. A whole swath of American's bought too much and screwed themselves. Bestbuy, Harleys, motorhomes, powerboats, restaurants, VEGAS baby!, etc. The money didn't disappear that was borrowered and spent... it just went to the smart guys around the world. Money doesn't disappear it just circulates around the table.
Why should the wealthy/elite who own all the assets suffer b/c some jackass wanted a 4000 sq ft 800k home in Vegas in 2006? That is now worth 400k that he defaulted on 1.5 years ago and was finally kicked out by the Clark County Sherriff.
The bonds/savings that back the banks were never wiped out. That is what the pension funds, mutual funds and the elite own. Your retirement account basically. The losses of 4-5T will be spread out over time with QE and borne by the masses.
thegreatloanblog.com
fyi ...... Bloomberg has PAR GSE mbs spreads vs 10yr at +66 yesterday ...... that would be tightest in history ( or at least to 1984 where Bloomberg starts ) . Bill Gross and everybody else who unloaded all their GSE mbs into the Fed bid at much cheaper levels are now ripping their hair out as they are underweight GSE mbs as they outperform everything else . And if Fed unleashes QE2 to buy more GSE mbs , Gross and the hundreds of others short the GSE mbs in their benchmark index will be locked in a box with chains around it and heaved off the bridge unless UST rates trade off sharply to make their huge cash positions winners