Derivatives: Darth Vader's Revenge Message Board

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Non-Tech : Derivatives: Darth Vader's Revenge

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To: Henry Volquardsen who wrote (151)	9/24/1998 10:36:00 AM
From: Sam	Read Replies (2) of 2794

Henry, " The really big torpedos that hit LTC were old fashioned leveraged bond trading. They were long mortgage back securities and short US treasuries. As credit spreads widened they got hammered." So does this mean that the spread between mortgage securities and the 30 year bond will widen still further than it already is (and it's historically pretty high right now--about 1 1/2%), as this position is unwound? Or is the position too small to matter? I have a vested interest in the answer to this question, as I am about to buy a new house, and am wondering if I should lock in 6 1/2 now, or wait a few more weeks. Or, for that matter, if deflation is indeed what is happening now, get an ARM. Any opinions?

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