Thursday, August 14, 2008

Things that make you go hmmm...

Fannie Mae conducted one of its regular "benchmark note" auctions today. Here is the relatively non-descript Reuters report.

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.




John

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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2 comments:

Anonymous said...

The Market Ticker has made a comment on the same spread, which I found entertaining. Everyone can assess by themselves is this the right way of thinking.

http://market-ticker.denninger.net/archives/539-The-Real-Story-Behind-Freddie-Macs-NY-Game.html

P.S. Thank you for a good blog and excellent analysis

August 14, 2008 at 10:27 AM
Anonymous said...

Re: trust in the US govt --- see sov CDS spreads.

August 15, 2008 at 12:08 AM

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