Art G
Thinks s/he gets paid by the post
- Joined
- Nov 5, 2007
- Messages
- 1,052
Well I've been waiting and waiting, but I believe FNM has got to get bailed out by the Government and with a 5% dividend, isn't it a decent buy now? Well, isn't it
Anyone out there that can point me to real debt of these companies (some examples) and an indication of what they are trading at today?
Thanks
Most any broker could sell you fannie and freddie bonds and MBS. The actual senior unsecured notes issued bythese companies trade at a wider than normal spread to treasuries, but still nothing to write home about, IMO. Bloomberg indicated that senior notes are trading at something like 82BP over treasuries for 10 year bonds. Put another way, with the 10 year at 3.84%, GSE senior notes would yield about 4.66%, although commissions and dealer mark-up would reduce your yield.
Brewer, could you give us an idea where SLM senior debt is trading? How about credit default swaps?
Ha
Most any broker could sell you fannie and freddie bonds and MBS. The actual senior unsecured notes issued bythese companies trade at a wider than normal spread to treasuries, but still nothing to write home about, IMO. Bloomberg indicated that senior notes are trading at something like 82BP over treasuries for 10 year bonds. Put another way, with the 10 year at 3.84%, GSE senior notes would yield about 4.66%, although commissions and dealer mark-up would reduce your yield.
Which quickly brought the markets to back over flatline, which even more quickly led to a stampede of sellers taking advantage of whatever tiny rally they can get to reduce their losses by 1%...Well, there you go: Fed threw open the discount widow to Fannie & Freddie. No more liquidity problems.
Which quickly brought the markets to back over flatline, which even more quickly led to a stampede of sellers taking advantage of whatever tiny rally they can get to reduce their losses by 1%...
Wow, what a horrible market this is. You know the dagger is still falling when every tiny rally is met with an overwhelming wave of selling.
Well, all you have to "read" is the chart which tracks the U.S. dollar.i've also been reading last few months that the Fed has been destroying it's own balance sheet lending all this money
Well, there you go: Fed threw open the discount widow to Fannie & Freddie. No more liquidity problems.
Didn't they just deny this?
RGE - Nouriel Roubini's Global EconoMonitor[August 2006] One cannot even exclude systemic risk consequences if the housing bust combined with a recession leads to a bust of the mortgage backed securities (MBS) market and triggers severe losses for the two huge GSEs, Fannie Mae and Freddie Mac. Then, the ugly scenario that Greenspan worried about may come true: the implicit moral hazard coming from the activities of GSEs - that are formally private but that act as if they were large too-big-to-fail public institutions given the market perception that the US Treasury would bail them out in case of a systemic housing and financial distress – becomes explicit. Then, the implicit liabilities from implicit GSEs bailout-expectations lead to a financial and fiscal crisis. If this systemic risk scenario were to occur, the $200 billion fiscal cost to the US tax-payer of bailing-out and cleaning-up the S&Ls may look like spare change compared to the trillions of dollars of implicit liabilities that a more severe home lending industry financial crisis and a GSEs crisis would lead to.
With house prices set to keep falling for the foreseeable future, losses will
likely continue to stack up for the two agencies, which have already endured
a combined hit of more than $11billion in the nine months ended March 31st.
And after recent falls, their combined market capitalisation has dwindled to
less than $19bn as leverage has skyrocketed. As of the end of March this
year, Freddie Mac’s leverage has ballooned to an unprecedented 50 times!
The US mortgage market seems to have arrived at the ultimate conundrum.
The GSEs need to keep pumping money into mortgages to keep the
mortgage market functioning but doing so appears to be fatally undermining
their financial health. As we have argued for several months, nationalisation
– partial or in extremis wholesale - may be the only long-term solution to this
paradox but, given that the GSE’s liabilities are themselves already larger
than the extant federal debt, the latter out-turn is itself barely feasible.
Didn't they just deny this?
Honestly, though, I can't imagine the government not backing their bonds. They've let people think that they would for so long, that I think letting FNM or FRE default would be about the same as the government defaulting on treasuries. End of the world kinda thing.
I wouldn't touch their stocks though. What is their debt/equity ratio? Isn't it about 60:1? No thanks, I'll stick to WFC and USB.
Didn't they just deny this?
Honestly, though, I can't imagine the government not backing their bonds. They've let people think that they would for so long, that I think letting FNM or FRE default would be about the same as the government defaulting on treasuries. End of the world kinda thing.
I wouldn't touch their stocks though. What is their debt/equity ratio? Isn't it about 60:1? No thanks, I'll stick to WFC and USB.
This is an interesting discussion. Actually, the government has always stated that the loans were "backed" by the government. They never said anything about the company itself. Therefore, they can take over the loans thus making the company a government entity, keep the loans secure, but thusly, screw over the shareholders.