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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Amy J who wrote (25553)	12/1/2004 10:54:26 AM
From: mishedlo	Respond to of 306849

RE: "FNM is constantly buying treasuries HIGH and selling them LOW." FNM buys the mortgage, why are they buying treasuries? Regards, Amy J To hedge against a refinance or payoff or interest rate risk. On a refi they might not get that loan next time. It might be at a lower rate. FNM goes thru a lot of paperwork and expense to put on loans. They have to prepare for some of those loans being taken off the table sooner than they expect, they also have to hedge their portfolio against interest rate changes do they not? Imagine FNM did not hedge with treasuries and interest rates shot up from 4% to 8% in a couple of years. Just what do you think that would do to the solvency of FNM? (loaning money out for 30 years at 4% and having interest rates of 8%) As a consequence they are buying or selling treasuries all the time. I assure you that dynamic hedging of treasuries is not doing their books any good with treasuries whipsawing back and forth like they have. Mish