Mortgage Spreads Blowing Out Toward March Levels

Posted by John Carney, Aug 14, 2008, 4:06pm

Yields on agency mortgage securities compared to U.S. Treasuries approached a five-month high today. Spreads rose to 215 basis points in intraday trading today, the highest level since early Mach 10, just prior to the crisis that leveled Bear Stearns, according to data compiled MKM Partners analyst Mike Darda. Over the past drbrtsl several weeks, the spread has been edging toward the 22-year high of 238 basis points set in March.

The so-called "agency mortgage bonds" amount to a $4.5 billion market guaranteed by federal agency Ginnie Mae or government-backed Fannie Mae and Freddie Mac. The rise of the spreads is widely viewed as a sign of stress in the financial system. More specifically, many believe that despite government moves to shore up Fannie and Freddie, the odds of the guaranteed bonds defaulting has increased.

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Posted in: Mortgages

Comments

1

Posted by guest, Aug 14, 2008 4:37PM

I think you mean $4.5 trillion market, Carney. $4.5 billion is 1 trade...

2

Posted by guest, Aug 14, 2008 4:40PM

Has it really been drbrtsl weeks since we were last at this level, Carney?

3

Posted by guest, Aug 14, 2008 4:45PM

do these posts even get proofed before they are posted?

4

Posted by guest, Aug 14, 2008 4:56PM

Drbrtsl = several.


Sincerely,
Sherlock Holmes

5

Posted by guest, Aug 14, 2008 4:59PM

And Sherlock-

Does billion = trillion?

6

Posted by guest, Aug 14, 2008 5:09PM

@5--

Nope, billion = no;;opm

7

Posted by hedge, Aug 14, 2008 5:34PM

He's givlomh with you guys. Tr;sc.

8

Posted by John Carney, Aug 14, 2008 5:44PM

Weirdest typo ever.

9

Posted by BlackSwan06, Aug 14, 2008 5:51PM

twas brillig.

10

Posted by guest, Aug 14, 2008 6:17PM

@9: Ksnnrtepvlu.

11

Posted by guest, Aug 14, 2008 9:52PM

Could the spread reflect prepayment risk? Lower mortgage interest rates would have to be a goal of the monetary authorities now to boost housing.

12

Posted by guest, Aug 15, 2008 6:32AM

kthxbye

13

Posted by guest, Aug 15, 2008 7:30AM

Prepayment risk?????
Have you met someone saying , gee i think this foreclosed house down the road looks great value, i better prepay now and buy this baby!!! dont be silly

14

Posted by guest, Aug 15, 2008 8:00AM

@13 - if you don't know what pre-payment risk is, you probably shouldn't comment on it. It makes you sound stupid....

That being said, given the lack of availability of mortgage finance these days pre-payments do seem unlikely.

And I think he means Trillion, not Billion too.

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