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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (13911)	5/14/2004 1:40:44 PM
From: ild	Read Replies (1) \| Respond to of 110194

How can FNM significantly hedge at all? Who would be a counterparty?

To: Wyätt Gwyön who wrote (13911)	5/14/2004 4:29:41 PM
From: mishedlo	Read Replies (2) \| Respond to of 110194

FNM hedges according to market direction. They are very heavily hedged towards rising rates, and when we were at the lows in yield the opposite occurred. It is a dangerous situation as FNM hedging/dehedging creates big moves at the extremes. Bond market almost blew up today IMO. When rates fall (and I say they will) FNM will be buying treasuries rather than selling them. They lose a ton of money on these whipsaws. Imagine what happens when housing stalls and all they do is lose on moves in hedging! Mish