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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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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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The GSEs and the Revised Accounting Standards |
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Written by Bill Berliner
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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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2/22/10--Yield Curve Shifts, Coupon Swaps, MBA Delinquency Report |
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Written by Bill Berliner
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The Treasury market looked to be on a trajectory toward higher long rates and a steeper curve, but the trend was interrupted late Thursday by the announcement that the Fed had raised the discount rate by 25 basis points to 0.75% At the time, the yield curve (measured by the 2-10 spread) was at an all-time wide of +293. After the announcement, however, the curve flattened sharply, and by Friday’s close was trading at +286, in line with the previous steepness record recorded in mid-January (as shown in Chart 1 below). Also of note was the widening of the 2-5-10 butterfly, which indicated that the 5-year lagged the rest of the curve late in the week. |
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The Impact of the Fed's MBS Purchases |
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Written by Bill Berliner
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This article originally appeared in the February 2010 issue of Asset Securitization Report (www.structuredfinancenews.com). The scheduled completion of the Federal Reserve’s MBS purchase program this March has created fears that rising mortgage rates will exert renewed pressure on home prices. While the program has been successful in keeping primary rates low, it has had some unanticipated effects that will impact the housing and capital markets even after outright purchases have ended. |
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Analysing the impact of the Fed’s mortgage-backed securities purchase |
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Written by Other (See Below)
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by Johannes Stroebel and John Taylor (c) VoxEu.org Should the Fed scale back its ownership of mortgage-backed securities? This column analyses the effect of the programme on mortgage interest rates. Controlling for prepayment and default risk suggests the programme has had little or no impact, and that the Fed could gradually cut the size of its portfolio without a significant impact on the mortgage market. |
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