MBS OP-ED: MAKING SENSE OF THIS MESS

re: MBS OP-ED: MAKING SENSE OF THIS MESS

k sweere — Sat, 14 Feb 2009 14:42:35 GMT

Who ever thought Macro-Economics would be so cool (so speakth a gray-haired MBA student)?! Soooo, if "IT" happens, then what? (perhaps I missed a post?). Everything seeks a balance, there is no free lunch. If the Fed and every homeowner locked in a low rate, doesn't that push inflation toward deflation? Or how about capital flight like has occured in many, small countries? Or.... what? (I'm still very much a student here.) And then once that happens, then how does the MBS community react?

re: MBS OP-ED: MAKING SENSE OF THIS MESS

RayRay — Fri, 06 Feb 2009 22:54:23 GMT

Excellent Job!!!! That was one of the best; if not the best explaination of our current market. Adam Keep up the great work.

re: MBS OP-ED: MAKING SENSE OF THIS MESS

Dean Gorenflo — Fri, 06 Feb 2009 00:48:00 GMT

Outstanding work. Reads very well as you are balancing your techno-speak with originator level commentary. Look forward to the data on the refundings this evening!

re: MBS OP-ED: MAKING SENSE OF THIS MESS

Matthew Graham — Fri, 06 Feb 2009 00:46:48 GMT

Damonpmr, either a scare tactic or a skewed view. The author's reasoning for rates going up is the same reasoning adam covered as being an understandable part of them eventually going down. 1/5th of the way through the process is no where near enough to know if "it's going to work." Rising treasury yields mean nothing considering current historically wide spread levels. The fact that the author would not account for this, one of the most glaring and basic facts of MBS analysis these days, is irresponsible at best. Then, no mention of primary/secondary spreads... tsk tsk... I would recommend use as toilet paper, but you're likely to catch something that way. Best stick to charmin'.

re: MBS OP-ED: MAKING SENSE OF THIS MESS

Johnny C — Fri, 06 Feb 2009 00:15:13 GMT

Still trying to digest all of that, but thank you for the insightful post. This site is a great resource in helping to understand everything that is going on and the potential implications we'll face in the future.

re: MBS OP-ED: MAKING SENSE OF THIS MESS

ihaveasontofeed — Thu, 05 Feb 2009 23:41:37 GMT

Great post. Thank you so much.

re: MBS OP-ED: MAKING SENSE OF THIS MESS

Jeff Nelson — Thu, 05 Feb 2009 22:51:43 GMT

Wow Adam what a great post - you should ask for a raise.

re: MBS OP-ED: MAKING SENSE OF THIS MESS

damonpmr — Thu, 05 Feb 2009 22:39:43 GMT

Just received this from one of my wholesalers. Sounds like a scare tactic to get us to lock and clear the pipeline. Doesn't this contradict what what you wrote? Or am I looking at it wrong? Your thoughts?? "Waiting for 4.5%?? Important insight to originators from XXX: If you have borrowers who are waiting around for the much-touted 4.5% mortgage that the media is slobbering all over, you need to get them locked and closed now. Look at what is being purchased by the Fed - - mostly 5.0%’s and 5.5%’s. To-date, their actions represent about 15% of their targeted purchases, which by now represents enough to get a read on whether it will work. And have rates come down dramatically since they started? No. In fact, they’ve gone the other way (read today’s post on the Freddie Mac survey). Just because the media heard 4.5% as a target doesn’t mean it will necessarily happen anytime soon. Also you have to look at the larger view. As mentioned below, the Treasury’s refunding efforts (redeeming bonds with proceeds received from issuing lower-cost debt obligations with ranking equal to or superior to the debt to be redeemed) are now at record levels and will continue – the Obama $900B spending plan will only add to that. This staggering amount of debt supply will need higher yields to attract buyers. The yield curve is steepening already to accommodate supply, and will continue to do so. Higher Treasury yields will put downward pressure on MBS prices, and mortgage rates will climb. Some analysts now think that as the 10-year moves above 3% the Fed will have to step in and buy long-term Treasury debt. Government agencies buying debt from other government agencies; sound a bit like Madoff? Any way you look slice it, the weather vane is pointing to higher rates, not lower ones. If your borrower can be bettered now, better to act now."

re: MBS OP-ED: MAKING SENSE OF THIS MESS

Harvey Collier — Thu, 05 Feb 2009 22:31:27 GMT

Your comments and analysis seem dead on. I've been trying to make sense of all these technical factors from previous posts and this one summed it up so I could understand. I appreciate the "plain & simple" summaries, as they make it easier for us Mortgage Advisors to explain to clients the ying & yang of the MBS market and why rates haven't dropped further.

re: MBS OP-ED: MAKING SENSE OF THIS MESS

max boehmer — Thu, 05 Feb 2009 22:19:13 GMT

Masterful. Thank you for sharing your knowledge.

re: MBS OP-ED: MAKING SENSE OF THIS MESS

Jeff Larson — Thu, 05 Feb 2009 21:29:45 GMT

Well said gglines!

re: MBS OP-ED: MAKING SENSE OF THIS MESS

gglines — Thu, 05 Feb 2009 20:48:15 GMT

Good Work, very readable So the Fed locks in long term rates at 60 to 70 months expected maturity then floats debt at 60 to 70 days and makes the spread. All the while trying to extend the debt float duration to lock in rates for the long term. The bet is that the economy recovers and the revenues rise so the stimulus that is slated to kick in 2010-2013 does not have as heavy a debt requirement and % of debt to GDP does not go off the chart. Better tell the DEMS that new entitlements are not Keynesian temporary defict spending or this will get real ugly. Ref: Bill Gross February outlook at PIMCO.com

re: MBS OP-ED: MAKING SENSE OF THIS MESS

Matthew Graham — Thu, 05 Feb 2009 20:14:27 GMT

unbelievable... you da man.

re: MBS OP-ED: MAKING SENSE OF THIS MESS

Jeff Larson — Thu, 05 Feb 2009 20:12:48 GMT

Tremendous Value! A game as large as the one we are playing in always explains itself with many variables. Adam, get a publisher! thanks!

re: MBS OP-ED: MAKING SENSE OF THIS MESS

Fred Winograd — Thu, 05 Feb 2009 20:10:33 GMT

Aah what a tangled web they weave. Great post the best I have seen so far. Please keep up the fine work and the abbreviated summations.