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Agency Vigilantes In Rampage Mode
While the short squeeze manipulators and stock borrow pullers try to kill any and every last bear out there, the much bigger problem of mortgage yields is starting to get out of control again: the last two days have seen the widest spreads on 30 Year Current Coupon FNMA in almost two months.
Instead of trying to squeeze out those who correctly grasp that AIG and CIT are worth nothing at best, and the only benefits accrue to government and pension fund longs (who incidentally can not sell by investment procedure) maybe the powers that be should focus on a concerted implosion in equities to get the stampeding masses into bonds and MBS again, especially with $75 billion in auctions comping up in the next two weeks. Because unless agencies are put in their place, the propaganda machine be unable to say that a record number of mortgages was started in July and August. Furthermore, as any day now it seems Fannie and Freddie will implode after Lockhart's sudden departure, look for some very interesting fireworks in the agency space soon.
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US TARP IG says some recipeints of TARP didn't necessarity meet quantitative criteria. So what are they going to do about that?
hhhmmmm, what DOES happen after Bernanke stops buying MBS?
Ahh the joys of trying to balance an unsustainable economy. The Fed has to convince enough people that things are improving to get confidence metrics and the equity markets higher. But they need a critical mass of non-believers who see a viable alternative in govt guaranteed bonds to keep funding costs low.
Cracks have been starting to show with moves like Mr. Durden is highlighting above. They're becoming victims of their own success as bulls circle-jerk themselves to nirvana and permabears hold their noses and buy risk assets.
I have my eye squarely trained on the 10-yr Treasury. Going back to the last recession (03) the 76.4% fibbonacci retrace is 4.53%. We blew past the 50% retrace of 3.67% and the 61.8% retrace is at 4.05%. I don't swear by the fibs but there is a strong technical pattern pointing us higher if equity markets stay flat/rise. There be massive negative implications for mortgage debt if the 10-yr starts shooting the moon.
I doubt the institutions will hold if that happens. They are presently primed to take profits, and if I understand what you're saying (interest rates and bond prices go up), they will start dumping equities.
Right on. Using history as my guide, in the week before black monday (in 87) the yield on the 10-yr went parabolic, tho the move itself was only about 50bps. Either way the 10-yr started to reverse this move the Thursday and Friday before as people realized, hey, this equity move has been insane and the Treasury yield is pretty fat.
The only way a yeild on the 10-yr of 4.5% wouldn't look attractive over equities is if we are in a hyperinflationary spiral (which we'll get to eventually, but i'm talking the next few weeks). But I firmly believe the orgy of bullishness can get yields that high before people come to their senses.
I don't understand. FNMA 5-year spread are at only 21 bp.
good thing they are getting those silly manipulators out of oil(or at least going to fine them). maybe now they can look into the one day +100% moves in the insolvent faux financials....oh wait... stocks going up is good for all(especially the tax payer that owns a large portion of these financial abominations)...nevermind.
I thought I heard that the administration was already 'seriously' considering these FNE Freddi going under GNMA. Beyond this possibility, the crowding out will be enourmous and the debt will ballon and the treasury...?
We already see that the chinese are probably asking for more TIPs as a hedge. Wise move.
If Fannie/Freddie get rolled into FHA (which securitizes through Ginnie), which I hope they will, FNMAs and Golds become collectors items.
Still short. Short of China buying up all commodities and Vedanta going to the moon, Michelin announcing they've developed some new form or rubber and Amazon announcing a share buyback they will not get me to relinquish my shorts now.
I should have done that a while ago now, in for the ride.
Fortunately in the UK, when using spread betting we seem to be allowed to hold as long as we fund the margin.
Sounds like you should be using options.
captcha says i should talk...
Seems to me that the biggest buyers of faux bank ipo's were the faux banks and friends. (go figger!)
Anyone surprised by the outcome in bkx bla bla just don't get it.
And Tyler, you made my day with the hairdryer/ratfink:)