Yesterday I sent this question to CI:
<<<Is there a way to track the mortgage backed market? Have spreads widened significantly today?>>>
Just got a reply:
To be honest, there are many ways to look at what's happening w/MBS vehicles and the broader fixed income market. Unfortunately, very little info is in the public venue, so to speak (w/o a bloomberg, etc.). Believe it or not, there has been no spread widening in the stuff we watch AT ALL!!!. For now, the market is blowing off FNM completely. We're watching swap spreads and there has been no widening at all. They are tighter than ever. Clearly, it has more to do with the rally in 10 year UST's than anything else.
A couple of other comments. The curve flattening is not good for the carry trade cowboys longer term. Short paper at 1.75 and the ten year at 3.97 is squeezing this trade. We have to believe pressure is building somewhere. But, as always, where will it show, if at all? Or will more paper simply be thrown at the game?
Maybe, and we mean just maybe, perceptual change is occurring in slow motion. FNM problem now a headline. More mainstream folks are acknowledging the bigger picture problems. When you have the head of one of the most powerful investment banks writing a book on the macro problems (Pete Peterson - Running On Empty), drip by drip the public is being treated to reality on the front page as opposed to having to descend into the bearish underground to get the facts.
It's a tough call at this point as to whether the market reacts to things like FNM incrementally or in one big herd movement. Like flipping a light switch. For now, the FNM news hasn't even caused a ripple. And maybe it's because in investor memories the problems with its sister FRE didn't cause the world to stop. Why should FNM be any different? The complacency is something else. At this point, we're sure nothing surprises you.
All the best,
CI
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