Heh, ISM/OSM again

[brewer12345]

Looks like OSM is now at a lower price and slightly higher yield than ISM now. And PFK isn't far behind, yield-wise...

[Nords]

I bet you put up these posts just to watch the volume jump on the exchanges...

[justin]

it's back even now at 21.60. Shhh... next time don't say anything so I can flip my ISM for some OSM! Dang efficient markets...

Seriously, at what point would you consider switching your ISM out for OSM? A 15 cent spread btw the two? These two seem so illiquid that ISM only trades a few times a day sometimes, and OSM isn't much better on some days. I'd hate to attempt an arb play and dump my ISM, only to find that OSM had shot up $0.25 before my ISM trade executed. Or if I tried to buy OSM before dumping ISM, the ISM would probably drop. Any thoughts?

(edit: OSM is back below ISM)

[brewer12345]

I'd probably swap for 50 cents.

[justin]

Brewer, how would you swap the two? A market sell and a market buy? Limit order(s)? Fill or kill on one or the other?

[brewer12345]

When I swap, I usually sell forst via a limit order, and t hen buy with a limit.

[haha]

I noticed that lately the spreads have been all over the place.
Yesterday and today, the OSM spread was only a few cents. I thought that if the spreads ever tightened up that ISM and OSM would trade more or less at parity. They have gotten closer, but still big variations that I can’t understand. Like someone might be bidding for 1000 ISM at 21.40, ask 21.55. Meanwhile he could hit the bid on OSM for his thousand at 21.29!

Is this brand loyalty?

Ha

[brewer12345]

I think it is a combination of retail investor cluelessness and an unsettled market.

[clifp]

I looked at the BLS for a good source of monthy CPI numbers in order to get feel for future yields, but I couldn't find anything without having to go through several pages of calculations.

Anybody have a good link to monthly CPI numbers does Bloomberg make this info available to those of us with out the Mayor's terminals?

[wabmester]

Just go to the bottom of this page:

ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

[youbet]

Originally Posted by wab

Just go to the bottom of this page:

ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

And when you go to that page....... you'll find it's been updated as of this morning. Crunching the numbers shows that the May 15 through June 14 interest rate for ISM will be 4.465% annual at par.

[soupcxan]

Originally Posted by youbet

And when you go to that page....... you'll find it's been updated as of this morning. Crunching the numbers shows that the May 15 through June 14 interest rate for ISM will be 4.465% annual at par.

That's 4.465% at par of $25? So really it's a YTM of 5.23% at the current price of 21.35?

[brewer12345]

Originally Posted by soupcxan

That's 4.465% at par of $25? So really it's a YTM of 5.23% at the current price of 21.35?

Plus the accretion to par between now and 2018.

[youbet]

Originally Posted by soupcxan

That's 4.465% at par of $25? So really it's a YTM of 5.23% at the current price of 21.35?

Yes, the 4.465% annual is at par. I always calculate it that way since everyone's basis is going to be different. And, as brewer mentioned, we'll be getting the difference between basis and par at muturity.

[clifp]

And that accural between the current price and par is roughly $.35/year (varies depending on OSM or ISM and the current price.) but it adds roughly 1.5 to 1.6% to the yield. Making the yield to maturity of these guys just under 7% not bad at all for an inflation protected, quasi government agency.

Can anybody explain what the credit risk of Sallie Mae is. I assume they are like Fannie Mae and have the implicit but not the explicit backing of the Federal Government.

In fact they are such a find that I guess I owe a some money to Dory's server fund as well as the thanks to the board members.

[haha]

Originally Posted by clifp

quasi government agency.
Can anybody explain what the credit risk of Sallie Mae is. I assume they are like Fannie Mae and have the implicit but not the explicit backing of the Federal Government.

Wrong assumption. Some years ago the governmnet conection was severed. Sallie Mae is no longer a GSE.

It is an S&P A credit.

Ha

[brewer12345]

Originally Posted by HaHa

Wrong assumption. Some years ago the governmnet conection was severed. Sallie Mae is no longer a GSE.

It is an S&P A credit.

Ha

Correct. But as a large financial institution, it is essentially immune from LBOs (bad for bondholders). A big slug of their assets are student loans guaranteed by uncle sam, so you have to make pretty dire assumptions to imagine something really bad happening to them.

[jdw_fire]

Originally Posted by soupcxan

That's 4.465% at par of $25? So really it's a YTM of 5.23% at the current price of 21.35?

Originally Posted by clifp

And that accural between the current price and par is roughly $.35/year (varies depending on OSM or ISM and the current price.) but it adds roughly 1.5 to 1.6% to the yield. Making the yield to maturity of these guys just under 7% not bad at all for an inflation protected, quasi government agency.

So at this price and inflation rate they can support a ~4.24% SWR!!!

[haha]

Brewer, I see it this way also. Especially with regard to so much of its asset structure being government guaranteed student loans. I do wonder why it carries an A rating, when GE for example is AAA.

Ha

[brewer12345]

GE is far larger and more diversified. SLM is a large, well-run finance company, but it is still a finance company.