The Fed’s dominance of the MBS market
At its current pace the Fed is taking about half a trillion of MBS securities out of the market. In fact the Fed is now removing more than 100% of the paper that is being issued.
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Browsing Tag
asset-backed securities
Four key trends developing as a result of the rise in US mortgage rates
The recent increase in long-term rates is causing major changes in the mortgage markets. Here are some key trends
The ABS market is back in business again
After a rough patch this summer (driven by "taper" fears), consumer asset backed securities (ABS) business is heating up again. The bulk of that business is represented by auto and credit card loans. The pick up in demand is visible in the…
QE Tapering, MBS volatility, and convexity hedging via Treasuries
While yields on treasury notes and bonds have risen across the board in 2013, the jump in rates has been uneven. The 5-10-year rates - the "belly" of the curve - have increased materially more than other maturities.
Distortions are evident in the U.S. mortgage market
Something highly unusual is happening in the mortgage market however. Recently jumbo mortgage rates have been lower than conforming rates. This is one of those market dislocations that most would have never thought possible. Yet here we…
This Is So Depressing
Fred Sheehan provides a compilation of articles and quotes suggesting that the solution to the mortgage problems in the United States bears a striking resemblance to the policies which led to those mortgage problems in the first place.
More on risk re-pricing in 2013
I have been fairly sanguine about some of the market turbulence in 2013. From the fiscal cliff to the sequester to the Japan rate rise to the Fed tapering, I haven't seen a trigger for wholesale risk repricing. I want to flag student loans…
Fed’s securities purchases blunt the impact of convexity hedging
Mortgage backed securities (MBS) have sold off sharply over the past month as fixed income markets face the new reality of rising rates. But unlike most other fixed income securities, MBS duration tends to increase with yield.
The Fed cannot support net interest margins
On Christmas Eve, the Wall Street Journal had two interesting articles on the credit situation in the U.S., one from the banks' perspective and one from the households' perspective. In general, the data were positive but I believe the…
The stealth bank bailout via leveraged FHA loans
When David Stevens left his position in the Obama Administration in 2011 as the head of the Federal Housing Administration to go to head the Mortgage Bankers Association, the chief lobbyist for the industry he once regulated, I posted on…