The bond market is saying that it’s safer to lend to Warren Buffett than Barack Obama. Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market. The $2.59trn of Treasury Department sales since the start of 2009 have created a glut as the budget deficit swelled to a post-World War II-record 10% of the economy and raised concerns whether the US deserves its triple-A credit rating. The increased borrowing may also undermine the first-quarter rally in Treasuries as the economy improves. “It’s a slap upside the head of the government,” said Mitchell Stapley, the chief fixed-income officer in Grand Rapids, Michigan, at Fifth Third Asset Management, which oversees $22bn. “It could be the moment where hopefully you realize that risk is beginning to creep into your credit profile and the costs associated with that can be pretty scary.”
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It looks like borrowers who don’t fit neatly into Fannie Mae and Freddie Mac’s lending criteria could soon be running out of options if they want to buy a house. Over the last week, many (if not all) of the biggest lenders specializing in lending to borrowers outside the QM lending box paused their activities due to uncertainty in the market. And now it appears that FHA lending as we know it is disappearing from the market too.
The challenge with mortgage forbearance is that someone has to pay the bill. In an effort to address the growing concerns and liquidity challenges faced by issuers, Ginnie Mae issued a statement on Friday on how it plans to help