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

To: russwinter who wrote (24862)	1/18/2005 3:08:19 PM
From: mishedlo	Respond to of 110194

5-10 closes to 48 bps We could easily be inverted after 2 more hikes Mish

To: russwinter who wrote (24862)	1/18/2005 4:14:36 PM
From: mishedlo	Read Replies (1) \| Respond to of 110194

2/10 year spread closes to 97 bps. gcm.com. One year LIBOR rate up 3 bps from last week libor-loans.com 3.25% plus 2.75% = 6.00% for Libor ARMS holders being reset next month. Russ, I am trying to get a feel for what std practice is. You might be making some brutally wrong assumptions. I will guess they are wrong but I do not know if they are brutally wrong, somewhat wrong, or typically correct. Here is my situation: I have an interest only loan (we make paymants as if it was a 15 yr loan however) Here are the details: 1 7/8 over libor. That is almost a full point less than your 2.75% assumption above. Also note that my loan is based off 1 month libor which is about 2.3% Yes, it does adjust every month automatically. At any rate, even after 1.25 in hikes my interest rate is 4.125 if my math is correct. IF greenspan hikes 3 more time my rate will still be lower than the fixed rate I moved out of. I can tell you those loans are available and if anyone wants one they can PM me. The question is, how far from normal is our loan? There is quite a big difference, however between a 1 month libor and a 3 month libor and a 3 yr libor. Also note that I was prepared for hikes and I am still prepared for hikes. That said, how many were prepared for 5 hikes? 8 hikes? How is that typical 1-yr ARM structured? Assuming thay had a 1 yr arm tied to 1 yr libor (that at the end of 1 yr stayed based on 1 yr libor) they took a hit but I doubt your 2.75% Is correct. If it went from 1 yr libor to 3 yr libor (good god were they F*d and are really going to be hurting). If it went from 1yr libor to one month floating at the end of that year, then things are not very bleak at all unless more hikes keep pouring on. Thus it might be important to know just what the industry standard arms look like and are based on, after the lockup period expires. I have no ideas here. I will see if I can find out. Mish

To: russwinter who wrote (24862)	1/18/2005 11:16:21 PM
From: John Vosilla	Read Replies (2) \| Respond to of 110194

<Kind of what telecom looked like in early 2000, warning flags, yet nobody cared. Financial/housing Bubble Bust alert du jour > Early 2000 going back 5 years to the day the 5, 10 and 30 were all at about 6.7% while the 13 week T-bill was at 5.3%. The spread between the 10 and 2 was somewhat smaller than it is now. No doubt with a couple of more quarter point rate hikes we will be in a similar position again if the 10 and 30 remain benign. Maybe watch also for the spread between the 10 yr and fed funds to be less than 150 basis points as another alert to recession. In any case I cannot fathom the true cleansing of debts and serious recession we need without a real backup in long term rates first. Perhaps it will be two recessions with the first one the shallow one and the one down the road 18-36 months the true bursting of the credit/housing bubble?