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

To: mishedlo who wrote (13933)	5/14/2004 6:20:05 PM
From: Wyätt Gwyön	Respond to of 110194

They are very heavily hedged towards rising rates, and when we were at the lows in yield the opposite occurred i'm not sure that exact positions could be known to the outside, at least without a significant delay. i have just read that they were much more heavily betting on rising rates than was Freddie Mac.

To: mishedlo who wrote (13933)	5/16/2004 6:05:00 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 110194

FNM hedges according to market direction not according to Barron's: The report shows that in a doomsday scenario -- in which 10-year Treasury rates were to rise by 75% or fall by 50% and stay at those levels for 10 years -- Fannie would burn through $27.2 billion of its Ofheo-computed total capital of $35.2 billion in a down move while losing only $5.8 billion in the upside interest-rate scenario. Freddie, on the other hand, would lose just slightly more than $5 billion in both interest-rate scenarios. Clearly Fannie has made an asymmetric "convexity" bet that interest rates are heading higher over the long term. Taxpayers better hope that they are right. online.wsj.com