Fannie and Freddie CDS Spreads Even Wider

Posted by John Carney, Aug 19, 2008, 4:01pm

The free fall of Fannie and Freddie shares slowed a bit today but the pricing on the credit default swaps continued to blow-out today. The spread on insuring Fannie Mae's debt widened about 40 points today, to around 355 basis points, according to a bond trader we trust. Freddie saw similar widening. That's around the same size as yesterday's CDS moves, which are widely believed to have contributed to yesterday's sell-off.

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Comments

1

Posted by guest , Aug 19, 2008 4:07PM

Do people not know debt is senior to equity?

2

Posted by guest , Aug 19, 2008 4:14PM

How wide can Fannie spreads get?

3

Posted by guest , Aug 19, 2008 4:16PM

@1:

I think people know that debt positions can be hedged with CDS.

4

Posted by guest , Aug 19, 2008 4:20PM

1, 3 Or maybe the divergence in prices reflects the fact that its easier for retail investors to buy FAN equity than it is to buy debt.

5

Posted by Debter , Aug 19, 2008 4:22PM

that's 10yr sub, I know it as around 290, but whatever. 10yr sr seems to be around 50 or so. Depends on who's quoting you though.

6

Posted by AJ , Aug 19, 2008 4:46PM

@1 do most of the retail people buying Fannie and Freddie stock know that? not a chance

7

Posted by guest , Aug 19, 2008 4:53PM

Mr. Carney,

I can't let this one pass without giving you proper recognition for such an outstanding and hilarious simile...

"Like zombies and herpes, deals often rise again"


That line made my day yesterday. Thanks.

8

Posted by guest , Aug 19, 2008 4:55PM

Do people not know that FRE is insolvent by any rationale measure and debt is taking a haircut if government doesn't guarantee?

9

Posted by guest , Aug 19, 2008 4:56PM

Thanks! It seemed like no one noticed!

10

Posted by guest , Aug 19, 2008 5:14PM

...CMBX indices sucking ass too.

11

Posted by guest , Aug 19, 2008 5:21PM

"if government doesn't guarantee?"

haha come on.

you think the market is in bad shape now? if that happened, forget about it.

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