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To: pallmer who wrote (6515)	3/12/2003 9:55:51 AM
From: Softechie	Read Replies (1) \| Respond to of 29602

Darn...it's only a cappuccino...

To: pallmer who wrote (6515)	3/12/2003 12:15:04 PM
From: pallmer	Respond to of 29602

-- Bank rumored to buy $15 bln of mortgage bonds -- By Dan Wilchins NEW YORK, March 12 (Reuters) - A large bank was said to be buying some $15 billion of Fannie Mae mortgage-backed securities last week, lifting mortgage bond prices, traders said. Banks have been stocking up on mortgage-backed securities for the last several months, because with the economy stagnant, there are few better investments, traders said. Details of last week's large trade are hazy, because mortgage-backed securities trade privately, not on an exchange. But a raft of investors, traders, and salespeople are hearing similar stories: a bank bought 30-year Fannie Mae mortgage bonds bearing 5.5 percent coupons, with estimates of the size of the trade ranging from $15 billion to over $20 billion. At least two players said they had heard the buyer was Bank of America<BAC.N>, but they had not spoken to anyone who had traded directly with the bank. Several other players, including two portfolio managers and a salesman, said the trade has the hallmarks of the kind of trade Bank of America would do. Bank of America, for its part, declined to comment. The Charlotte, North Carolina, based-bank was said to have taken similarly large positions in mortgage bonds in the fall and in January. The latest transaction could have been a reinvestment of principal from earlier BofA mortgage bond investments that was returned to the bank by consumers refinancing their mortgages, traders said. Price action last week in Fannie Mae mortgage bonds bearing 5.5 percent coupons would seem to reflect large purchases: the price gap between 5.5 percent coupons securities and 6 percent coupons narrowed by about 10/32, traders said. The gap between the prices of the two securities is now unusually tight, they noted. RIDING THE CURVE The steep gap between short- and long-term rates allows banks to earn a solid return by borrowing at low short-term rates and investing in higher-yielding, longer-dated securities. That trade should be profitable as long as uncertainty reigns in the economy, and uncertainty could reign for a while. But if the economy reverses direction quickly, short-term rates could surge and trades based on a sharp gap between short- and long-term rates could become losers. ((Reporting by Dan Wilchins; editing by Dan Grebler; Reuters Messaging: dan.wilchins.reuters.com@reuters.net; +1 646 223 6320)) (C) Reuters 2003. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world. nN12427084 Symbols: US;BAC CA;BACC 12-Mar-2003 17:12:39 GMT Source RTRS - Reuters News