Interest Rate and Hedge

Discussion in 'Options' started by traderharley, May 11, 2012.

  1. sle

    sle

    The basis might f*ck you up - bond yield can go further down while mortgage rates will not follow.
     
    #11     May 12, 2012
  2. newwurldmn

    newwurldmn

    Libor spread and personal credit are largely unhedgable.
     
    #12     May 13, 2012
  3. excellent point - there could be a black swan that drives TNX to 1.5 from 1.841 (diff of 34 bps) but that doesn't mean mtg rates which are keyed off the TNX will drops the same amount. my guess is they'd drop 10 bps - maybe.

    remember unlike the spx, the mtg rate can vary from bank to bank - the price of spx will not vary from bank to bank or broker to broker. if a bank feels there is too much risk lending at a low spread they won't do it - they'll just keep reinvesting in treasuries w/ ZERO risk which is what they've been doing.
     
    #13     May 13, 2012