Jim’s Mail Box

Posted at 11:21 AM (CST) by & filed under Jim's Mailbox.

Hi Jim,

More grist for the QE3 mill.  Sounds like it will be sooner rather than later.

How long have you been saying “QE to Infinity”?

Best Regards,
CIGA Black Swan


Mortgage-Bond Market Roiled as Bernanke Report Fuels Speculation
By Jody Shenn – Jan 5, 2012 4:32 PM ET

Fannie Mae and Freddie Mac mortgage bonds that guide home-loan rates gained while those backed by high-cost debt declined on speculation the U.S. government may boost efforts to aid the housing market.

Yields on Fannie Mae’s current-coupon 30-year fixed-rate mortgage (MTGEFNCL) securities, or those trading closest to face value, declined about 4 basis points to 84 basis points more than 10- year U.S. government debt as of 3:30 p.m. in New York, the tightest spread since May 19, according to data compiled by Bloomberg. The company’s 6.5 percent securities, whose underlying loan rates average about 7 percent, fell almost 0.2 cent on the dollar to about 111 cents, Bloomberg data show.

The current-coupon bonds, which guide loan rates, extended this month’s gains relative to Treasuries after a report from Federal Reserve Chairman Ben S. Bernanke yesterday called the weakness in the housing market a “significant barrier” to U.S. economic health.

“The white paper increases the probability of QE3 centered on MBS as the paper emphasizes that housing is still a key problem with no easy solution,” Morgan Stanley analysts Vipul Jain, Janaki Rao and Zofia Koscielniak wrote today in a note to clients, referring to what would be the Fed’s third round of bond buying called quantitative easing.