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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 (49790)	1/15/2006 3:17:25 PM
From: mishedlo	Read Replies (1) \| Respond to of 110194

finance.yahoo.com why the discrepency? bloomberg.com

To: russwinter who wrote (49790)	1/15/2006 3:23:57 PM
From: Kailash	Read Replies (1) \| Respond to of 110194

A possible reason FCBs are attracted to agency paper over t-bills is that the former appear to have a backing in "real goods" -- that is to say, real estate. If borrowers default, lenders have security in their properties. The original meaning of the word 'mortgage' and the system banks have for centuries relied on to secure their property loans -- they repossess if the borrower defaults -- does not, however, necessarily provide much security in a bubble. Many borrowers will default when they're upside down because prices have fallen or simply haven't risen, and defaults will hasten a fall in prices. Market prices for the property will thus typically not cover the outstanding loan. Reckless borrowing by banks is reckless precisely in that they have insufficient security in the properties themselves. In addition, mortgage lenders today routinely package the loans and sell them -- the moral hazard of the agencies is that they pick up such loans with even less concern than the banks that they are realistically secured. Are there historical precedents to what happens to agency bonds when property prices take a hit? Do they have less backing today than they used to?

To: russwinter who wrote (49790)	1/15/2006 4:21:27 PM
From: mishedlo	Respond to of 110194

Yield curve chart error correction. Has the FED already overshot? globaleconomicanalysis.blogspot.com Mish This post is a revised listing. The only change is substituting a Bloomberg yield chart for one from Yahoo. Several people pointed out errors with the yield curve chart in the original post. The chart from Bloomberg better shows the current inversion and yields. The fourth chart I maintain in Esignal. The symbols available are the 13 week, 5 year, 10 year, and 30 year treasuries. I like that chart because it shows the changes over time. It seems the 5, 10, and 30 year yields match Bloomberg but the 13 week appears to be the discount at 4.22 instead of the yield which is at 4.32. I have no control over that but mentally make a note that the 13 week should be showing a very slight 4 bps inversion with the 5 year yield in that bottom chart. Other than the chart switch and the explanations above, there are no other changes.