AI returns after a nearly 2-week hiatus. Well, semi-hiatus as I was traveling and not able to write much. If you've e-mailed me and I haven't gotten back, I'm sorry.
While every one is talking about Monday's big TARP Episode II release, there's been some other goings on. Big news today is the potential for Fannie Mae and Freddie Mac to be taken on balance sheet by the Federal government. This isn't such huge news from a practical perspective, but could radically change debt trading. Imagine if there is no more agency issuance!
More on this on Monday.
Friday, February 06, 2009
I'm back
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5 comments:
I'd be curious to know your thoughts as to what such a move (the F twins onto the Treasury balance sheet) would do to the repo market and the mortgage REITS (NLY and the like).
AI,
What is your take on Bernanke's w/drawal of liquidity from the system? On the eve of a giant US bond auction next week too. Hmm....
I smell something fishy.
http://www.gmtfo.com/RepoReader/OMOps.aspx
There will be agency issuance. Just because it is in Feb/Treasury balance sheet doesn't mean everything will be financed by Treasuries. The government has to off load prepayment risks.
There may be agency MBS issuance, but (perhaps) not agency debt issuance.
Debt:
The Fed has been withdrawaling liquidity from the system pretty regularly over the last few months, owing to the hoarding of cash by banks.
The feds putting the GSEs onto their balance sheet is not a big deal. I think it just reflects the government accountants deciding what their 80% equity stake requires them to do on their own balance sheet. I am almost certain that it is still going to be business as usual at the GSEs, with the exception of having to take all that cash they don't need (equity problems are different from cash flow problems) and paying outragious interest on it to make earning a profit that much harder.
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