The article is incorrect... Maybe they mean to say the "securities the Fed bought from the mkt which, in turn, bought them from the Treasury" and decided to skip the bit in the middle. The difference is important.
The pernicious(ness) of the mark relates directly to the UST's guarantee on this garbage. The money to pay my Progressive auto policies comes from somewhere (wealthy ex wife). Are you saying the UST is like my ex wife?
I don't have the honor of knowing your ex-wife, excellent woman that she is, I'm sure. So correct me if I'm wrong, your problem isn't with the Fed marking this crap at par, but with the guarantee itself?
No, I have a problem with the mark to par, but that's just the nip that's showing. I can't convince my clearer to mark to par the Fannies, Freddies and Ginnies I buy (assuming coupon < spot rates), regardless of the guarantee.
Another ray of sunshine! http://www.bloomberg.com/news/2011-...k-loan-data-as-high-court-rejects-appeal.html
Yeah, but that's 'cause you might not have enough money in case you get a margin call. You're subject to liquidity constraints/cashflow issues and therefore you have to mark-to-mkt. The Fed can't have liquidity issues, by definition. You're most powerful and intelligent, no doubt, but you ain't the Fed. You are leveraged fast money. Fed's about as real money as it gets.
Fed is holding mostly Agency MBS that are a bit higher on the coupon stack, considering that the current Fannie coupon is 4.5. Guess what - that paper is actually trading at a premium and they are marking it at flat. Sounds like fraud to me - they are under-reporting their MtM gains. PS. Just looked at the actual Fed portfolio - it's mostly fannie 4.5 paper (TBA 4.5s are all at a premium)
This does not make sense. Are you buying TBAs or seasoned paper? Are you holding them at your PB as cash or repo them out? What exactly do you mean by spot rate - current TBA coupon?
Fed's Fisher will get kicked off the Fed Reserve Board if he doesn't shut his yap. You must toe the party line or face the consequences.
Fisher is actually a very very good guy. Apart from his using Lindsay Lohan's name in vain, for which he's gonna get sued, I'm sure, he's very credible.