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3/8/10 MBS Commentary--Spreads and Volatility, Buyouts and Implied Fannie Speeds |
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Written by Bill Berliner
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Monday, 08 March 2010 14:12 |
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MBS performed well last week, with the Fannie 30-year current coupon rate tightening by four basis points on the week to interpolated Treasuries and 2 basis points to swaps. Duration-neutral price performance over the period was also fairly good; most liquid Fannie coupons (up to 6s) outperformed Treasuries by 8-12 ticks on the week. There are a few interesting things to note with respect to the MBS market, however. The chart below indicates that the 30-year current coupon is approaching its tightest levels over the last six months or so; however, spreads have not pushed through the tights first seen in mid-November, and again seen in early January. Moreover, spreads versus swaps remain at the midpoint of a range first established last September. Depending on whether you think that swaps remain a relevant benchmark, MBS may not be as richly valued as it appears at first blush. Moreover, if the sector is rich, I’d argue that it has a great deal to do with the effect of the Fed’s purchase program on volatility.
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Last Updated on Monday, 08 March 2010 14:31 |
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The GSEs and the Revised Accounting Standards |
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Written by Bill Berliner
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Monday, 01 March 2010 08:51 |
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This article originally appeared in the March 2010 issue of Asset Securitization Report (www.structuredfinancenews.com). The analysis of the changes in the GSEs’ delinquent loan buyout policies focused on their impact on prepayment speeds and coupon swaps. An underlying notion was that the implementation of FAS 166 and 167 by Fannie Mae and Freddie Mac, which took place effective at the beginning of 2010, paved the way for the announcement; since the loans are now carried on their books at fair value, buyouts no longer have any affect on the GSEs’ income statements. |
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Last Updated on Monday, 01 March 2010 09:06 |
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Fannie Keeps the Mortgage Market Off-Balance |
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Written by Paul Jacob
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Thursday, 04 March 2010 09:31 |
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Fannie’s Monday announcement giving details about the impending “catch-up” buyouts of delinquent loans may have been intended to calm the passthrough market. It didn’t. The disclosure, which projected the volume capacity and intended priority of the buyouts, did go a long way towards helping the market value current and future months pricing for premiums. But we think significant price discrepancies still exist in front-month rolls and swaps; we also think Gold-Fannie swaps don't at all reflect longer-term differences in credit quality and involuntary prepayments. |
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Last Updated on Thursday, 04 March 2010 10:06 |
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About FixedIncomeColor.com |
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Written by Bill Berliner
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Monday, 09 March 2009 12:38 |
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FixedIncomeColor.com® is an on-line community designed to facilitate interaction between participants in the fixed-income markets. Sponsored and administered by Bill Berliner of Berliner Consulting & Research, the site contains information, data, commentary and research on a variety of fixed-income investment products. Before getting started, please visit the"About Us" page for more information and the basic rules of the site. Also, please be sure to visit the Terms of Use and Privacy Policy sections. Membership is free. And if you've forgotten your username or password, it's easy to reset them; just follow the directions in the User Login section on the left side of the Home page. We want your ideas and feedback. Please click “Contact us” to message the Administrator.
Thanks…BB |
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Last Updated on Friday, 08 January 2010 12:49 |
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Analysis: Option ARM Update |
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Written by Paul Jacob
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Monday, 01 March 2010 10:55 |
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The Pay-Option ARM sector continues to be at the intersection of all the troubling trends in residential mortgage credit: rising total delinquencies; a substantial backlog of troubled loans without resolution; severely underwater borrowers; concentrated geographic exposure to boom-and-bust areas. Risk / reward in this sector going forward will largely be driven by three factors: (1) when and how the backlog of troubled loans is cleaned up; and (2) whether new delinquencies deteriorate further (from strategic defaults and unemployment) or improve (from credit burnout); and (3) whether loss severities can remain stable despite the enormous number of homes facing liquidation and the troubling age of delinquencies. |
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Last Updated on Monday, 01 March 2010 14:36 |
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