The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: Paul Kern who wrote (106268)	2/22/2008 4:06:58 PM
From: Hawkmoon	Read Replies (1) of 306849

They later brought back very limited auctions because of demands by pension funds and the insurance industry. Yep.. the very same institutions that found themselves with no recourse but to invest in 30 year mortgage backed bonds.. And of course, those investments looked pretty good up until last August.. This is the "dirty little secret" about the current financial crisis. Those institutions no longer want mortage backed debt. They want 30 year government bonds. But there isn't enough supply available for current government 30 year bonds, let alone 10 year bonds, to absorb a massive reallocation of $$$ previously deployed into the mortage market. That means the Treasury has to increase the supply of those instruments to meet demand (ie: deficit spending) But increase that supply too much, and it would exacerbate the problem with finding a bottom in the mortgage back bond market.. After all.. why repeat an error when you can invest in relatively safe Gov't paper? It's quite a quandary, IMO. And it continues to permit the government to borrow money at a lower rate relative to the private market. Hawk

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