Stagnation in TBA MARKET. Bleh!

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Last week Treasuries sold off on expected record gov. debt issuances, the Federal Reserve's volatility calming bid struggled to provide a period of patience (stability) while our lenders attempt to muster the confidence to commence the "un-marking up" of your rate sheets. The world celebrated a new President/CEO while the Federal Reserve quietly continued to conduct its Quantitative Easing efforts (I hate to keep saying the "QE" term but we feel like everyone should be aware of gov. "support" of the markets). The historical event brought on thinly traded markets and MBS Short timers/Short cover-ers took advantage of just the slightest "down in coupon" bid bias. Did you lock  your loans last week? Doesn't look like too many new commitments were reported, so prepays speeds remain a mystery (consensus is getting warmer though!!!) This unknown variable (prepays(refis)) has pushed MBS activity away from the mainstream TBA markets into the land of specified portfolio plugs. (Specified pools provide prepay protection). Hence the boring/stagnate activity in the TBA market lately.

This week we lose a market participant to cultural customs...from January 25-31 the MBS market will have to do without a big Ginnie fan as the Chinese bid will be too busy celebrating the lunar New Year. The "Spring Festival" is the most important Chinese holiday (correct me if I am wrong please) so the GN bid may fade...OR the Fed will take a turn buying GN pools. Seems logical. yes/no?

With the new administration I have been intently listening for more chatter about a government founded bank that would buy up all the toxic assets from banks. I for one don't believe much progress can be made while there is no market for the gastly/unmarketable CDO securities. Question though...after toxic assets are passed along to the "RTC-like" institution, what is the next step...sink the RTC to the bottom of the ocean...like Megatron? haha yeah yeah geek I know...

Maybe a "Brady Bond" type strategy? Distribute the badness evenly around the world...anyway moving on...Fannie/Freddie are again in need of funding. Last Friday Freddie filed this REPORT with the SEC to let them know they needed to get some money. Well here is what Fannie released today....

Uh oh.

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