Replies to post #224258 on Fannie Mae-No Politics (FNMA)

[big-yank]

Obviously someone needs to help you understand the difference between MBS and the mReits that gobble them up. Fannie packages them. mReits like NLY, AGNC and others scoop them up. Then the mReits make money when their borrowing cost is less than what they pay for the coupon rates in the mortgage basket.

Why do you say with apparent conviction that FNMA securities held in a market sell off, or quote sources that say the same thing? All bonds tend to hold up in a flat interest rate market as has been the recent norm. Then they go down if rates rise, making the old bonds less attractive than new bonds with higher coupon rates.

Glad I could clear that up for you.

[mike_usa]

When the Federal Reserve talks about buying mortgage-backed securities (or MBS), it’s referring to the To-Be-Announced market (usually referred to as the TBA market). The TBA market allows loan originators to take individual loans and turn them into a homogeneous product that can be traded. TBAs settle once a month, and Fannie Mae loans are put into Fannie Mae securities. TBAs are broken out by coupon rate and settlement date. In the chart below, we’re looking at the Fannie Mae 4% coupon for June delivery.

marketrealist.com