Thursday, August 14, 2008
Things that make you go hmmm...
The spread over Treasuries was 122bps.
In the old days when Fannie debt was explicitly not backed by Treasury it was about 60bps or less.
The US Government has made it clear that it backs Fannie - so this extra-wide spread is surprising...
Unless people no longer trust the US Government.
PS. The investment implications are not good. The only plausible buy case for Fannie at the moment is that its not much to pay for a franchise with a US Government guarantee. If nobody trusts the guarantee there is no franchise...
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