Monday, July 21, 2008
Are Fannie Mortgages Cheap or is its Debt Expensive?
The government is willing to
backstop Fannie
so Fannie can backstop their Mortgage Backed Securities "
MBS
" if needed to.
So why is the
MBS
trading ~100 bps cheap to their debt (OAS less
CDS
) after trading MORE EXPENSIVE JUST SIX MONTHS AGO? Interesting times...
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