Replies to post #336961 on Fannie Mae-No Politics (FNMA)

[big-yank]

Sure. But there were also $.6 in fair value losses on widening spreads. These are not losses that inevitably cycle through the metrics. These are losses that signal underlying margin weakness of a long-term nature.

JMHO.

[big-yank]

I also meant to ask you what you think the impact will be as the new iterations of STACR bonds as part of the credit risk transfer initiative whereby $30 billion for each GSE's bond issuance appears to be headed for benchmarking against LIBOR, not short term treasury rates as has been the norm since the program was introduced in 2013. LIBOR volatility, as I'm sure you know, introduces a whole new level of volatility when any changes, up or down, take place in interest rates.

Thoughts? Maybe you would also know if hedging based on a LIBOR spread is as easy to come by as it is under the conventional Treasury basis. I know $30 B is a small part of overall bond inventory at the moment, but I sense this is where most of the high quality loan-backed MBS is headed in the years ahead. The latter point is concerning as it leaves the GSEs with the less healthy, collateralized backing if another downturn takes place.