Comments on: A Puzzle http://alephblog.com/2008/10/31/a-puzzle/ Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control Fri, 25 May 2012 21:31:47 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: David Merkelhttp://alephblog.com/2008/10/31/a-puzzle/comment-page-1/#comment-19874 David Merkel Fri, 07 Nov 2008 21:07:34 +0000 http://alephblog.com/?p=1084#comment-19874 matt, the guarantee is not well respected. Agencies trade wide of Treasuries by 1%+. Either they should be flat to Treasuries, or F&F should have a similar spread over GNMA. gaius, you might be right... matt, the guarantee is not well respected. Agencies trade wide of Treasuries by 1%+. Either they should be flat to Treasuries, or F&F should have a similar spread over GNMA.

gaius, you might be right…

]]> By: matthttp://alephblog.com/2008/10/31/a-puzzle/comment-page-1/#comment-19651 matt Sat, 01 Nov 2008 00:30:08 +0000 http://alephblog.com/?p=1084#comment-19651 Mr. Merkel: Could it have something to do with the TARP? Or are they just buying the toxic waste? Also, I wonder why you think there should be a spread between FNMA and GNMA notes when there is now an explicit guarantee of the Fannie and Freddie. It seems like the only spread should be a liquidity one. Mr. Merkel:

Could it have something to do with the TARP? Or are they just buying the toxic waste?

Also, I wonder why you think there should be a spread between FNMA and GNMA notes when there is now an explicit guarantee of the Fannie and Freddie. It seems like the only spread should be a liquidity one.

]]> By: James Cullenhttp://alephblog.com/2008/10/31/a-puzzle/comment-page-1/#comment-19642 James Cullen Fri, 31 Oct 2008 21:29:46 +0000 http://alephblog.com/?p=1084#comment-19642 I guess this is more evidence of your post a few days back, where you said that odd happenings in the bond markets tend to occur in clusters. I couldn't begin to explain what's happening, but I will venture that people believe nationalizing Fannie/Freddie will lower funding costs because they don't actually look at the data, since it's so intuitively correct of a statement and thus easy to make... I guess this is more evidence of your post a few days back, where you said that odd happenings in the bond markets tend to occur in clusters.

I couldn’t begin to explain what’s happening, but I will venture that people believe nationalizing Fannie/Freddie will lower funding costs because they don’t actually look at the data, since it’s so intuitively correct of a statement and thus easy to make…

]]> By: gaius mariushttp://alephblog.com/2008/10/31/a-puzzle/comment-page-1/#comment-19624 gaius marius Fri, 31 Oct 2008 15:16:44 +0000 http://alephblog.com/?p=1084#comment-19624 i hesitate to offer this, but could it be that <a href="http://www.clusterstock.com/2008/10/more-bearish-than-roubini" rel="nofollow">there's just no capacity out there to arbitrage in scale sufficient to approximate efficiency</a>? it seems all too possible given that the arbitrageurs were largely hedge funds (most of whom are liquidating to some extent) and foreign central banks (who have by brad setser's measure moved to treasuries for the maximal guarantee -- and who have not been particularly yield sensitive in any case). i hesitate to offer this, but could it be that there’s just no capacity out there to arbitrage in scale sufficient to approximate efficiency? it seems all too possible given that the arbitrageurs were largely hedge funds (most of whom are liquidating to some extent) and foreign central banks (who have by brad setser’s measure moved to treasuries for the maximal guarantee — and who have not been particularly yield sensitive in any case).

]]> By: gee whizhttp://alephblog.com/2008/10/31/a-puzzle/comment-page-1/#comment-19622 gee whiz Fri, 31 Oct 2008 14:42:18 +0000 http://alephblog.com/?p=1084#comment-19622 Government backstops aint what they used to be. Government backstops aint what they used to be.

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