Archive for July, 2010
HousingWire publisher Paul Jackson just sent me an email in reference to an article by Jody Shenn called "Mortgage-Bond Spreads Surpass Lows Reached During Fed Buying" to which our publisher commented that, "Treasuries are too rich for buyers, so they're flooding the agency MBS space."
The agency MBS space is indeed surging at the moment, with buyers outnumbering sellers by a 3×1 margin according to one trader I spoke with. This is positive news for for the agency space, at least, while private MBS (and wider ABS markets) aren't exactly feeling the love right now.
To be sure, the investor base that loves government backing — be it Treasuries, Fannies, Freddies, Ginnies – always gives this feeling of back to forth. As Rob Chrisman puts it on Mortgage News Clips, choosing between the two today is simply a matter of yield.
Considering that GSE reform is on the horizon, however, the secondary market is only just now beginning to consider the full impact on trading agency bonds if and when the event comes where government-sponsorship is pulled (or at least modified in some way). How will agency MBS trade then?
I was taken somewhat aback when one trader posited recently that relative value was being found in certain CMBS tranches linked to the Public-Private Investment Program (PPIP). It almost feels like that program is utterly offline, now that government support in the form of TALF is shut and nearly zero media coverage is being given to the matter. Despite negative news headlines on rising delinquencies within the CMBS sector, one trader noted a surge in activity in AMs and AJs — two commercial investment tranches below triple-A that are PPIP-eligible.
Not as if there's gold in every mountain, of course. Deutsche Bank analyst Harris Trifon recently sounded a warning on certain vintages, saying that 2006 AJs will only return $0.87 on the dollar. 2005s on the other hand, are holding up significantly better.
"We believe that many PPIP managers and other money managers will and should increase their investments in bottom tier 2005 AJs," writes Trifon in a research report.
In a speech last week to the Senate Finance Committee, Richard Hillman of the US Government Accountability Office noted improvements in securitization markets and stabilization of certain legacy asset prices as motivating the closing of TALF and PPIP.
However, since then "indicators we have been monitoring suggest credit markets have been able to sustain their recovery despite the winding down of key programs initiated by the Federal Reserve, Treasury, FDIC and others."
In fact, according to Pensions and Investments, PPIP managers are now seeing returns of close to 14%, compared to 8% in March and under 2% in December 2009 –- results that would be very attractive in the private MBS space.
Jacob Gaffney is the Editor of HousingWire.
Write to him.
Insurance regulators are seeking a firm to review commercial mortgage-backed securities after hiring Pacific Investment Management Co. to assess the industry's home-loan investments.
State insurance commissioners, in search of an alternative to rating firms Moody's Investors Service and Standard & Poor's, could pick an evaluator by Sept. 3 to review investment losses that carriers might suffer on about 7,500 commercial mortgage- backed securities.
Yields on Fannie Mae and Freddie Mac mortgage securities that guide US home-loan rates reached record lows relative to 10-year Treasuries as investors search for higher returns amid limited refinancing by borrowers.
Fannie Mae's current-coupon 30-year fixed-rate mortgage bonds narrowed 0.02 percentage point to about 0.58 percentage point more than 10-year Treasuries. The gap reached 0.59 percentage point on March 29, two days before the Federal Reserve ended its buying of $1.25trn of so-called agency mortgage bonds. The spread matched that low two weeks ago.
A New York judge put two shareholder lawsuits against executives and directors of Goldman Sachs Group on hold until progress is made on 16 other lawsuits related to a controversial debt transaction involving the Wall Street bank.
The lawsuits, brought in state Supreme Court by Robert Rosinek and Morton Spiegel, accuse Goldman officials, including chief executive Lloyd Blankfein, of breaching their fiduciary duties by letting the bank enter transactions involving risky collateralized debt obligations tied to subprime mortgages.
The Securities and Exchange Commission apparently no longer has to comply with requests for information from the public, including those filed under the Freedom of Information Act, because of a little-noticed provision in the new financial regulations that became law last week.
The law exempts the SEC from disclosing records or information derived from "surveillance, risk assessments, or other regulatory and oversight activities." Given that the SEC is a regulatory body, the provision covers almost every action by the agency. Congress and federal agencies can request information, but the public cannot.
Bank of America Merrill Lynch plans to sell a $92m bond backed by troubled reverse mortgages insured by the federal government.
The bond is supported by 760 "home equity conversion" mortgages, or those in which the lender gives the older borrowers cash in return for equity in the home. The borrowers are all in distressed situations, including foreclosure.
Fannie Mae chief executive Michael Williams suggested that the company's new, tougher lending standards are here to stay.
In a speech in Washington Wednesday, Williams trumpeted Fannie's stronger book of business and described a "new realism" in the US housing market in which it takes longer to get a mortgage loan and a smaller share of people are able to become homeowners.
Deutsche Bank AG, Germany's largest lender, is dismantling a group that advises companies on commercial real estate transactions, according to people with knowledge of the matter.
Warren Friend, a managing director who ran the New York- based division, may be leaving the bank, said the people, who declined to be identified because the move hasn’t been announced.
A half-built villa on Mykonos, an island in the Aegean Sea known for its all-night beach parties, is being offered by brokers at Athens-based Ploumis Sotiropoulos OE for €2m ($2.6m) after the price was reduced by €500,000. The same firm is seeking a buyer for a three-bedroom home on Corfu for €750,000, down from an original asking price of €1.4m. So far, no bidders have emerged.
