Is the Convexity Trade “Getting Away” from Fannie?
Are They the Next LTCM?
Audio
Fannie Mae’s predicament is more than an issue for mortgage players. Their sheer size affects all fixed-income players. Our biggest fear is that they are creating a “bubble” in the bond market. If their prepayment models are not working due to the historically low level of interest rates and they are frantically buying long-dated assets to replace lost duration, they could be pushing interest rates much lower then they should be.
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Commentaries — September 18, 2002
Is the Convexity Trade “Getting Away” from Fannie? Are They the Next LTCM? Audio Fannie Mae’s predicament is more than an issue for mortgage players. Their sheer size affects all fixed-income players. Our biggest fear is that they are creating a “bubble” in the bond market. If their prepayment models are not working due to… Continue reading Untitled