Yield spreads between debt securities issued by Fannie Mae (FNM - commentary - Cramer's Take) and Freddie Mac (FRE - commentary - Cramer's Take) and U.S. Treasuries are narrower today, indicating reduced worries about GSEs (government sponsored enterprises). Today's narrowing reflects confidence in the likely passage of the housing support package working its way through Congress.
The yield spread between Fannie Mae's 10-year and the U.S. 10-year is today at 63.3 basis points, down 6 basis points on the day (the 63-basis-point spread means that Fannie's 10-year yields 63 basis points more than the U.S. 10-year).
The drop is the fourth in five trading sessions, and well below the most recent peak of 90 basis points, which existed before the U.S. Treasury and the Federal Reserve indicated they would backstop Fannie and Freddie. This year's peak was 98 basis points, set on March 14, which was the Friday before the Bear Stearns rescue.
Tony Crescenzi Blog Mortgage Apps Low 7/23/2008 9:42 AM EDT By next spring, a potential return of consumer confidence could fuel a turn.
Tony Crescenzi Blog Yield Curve Flattens 7/22/2008 3:51 PM EDT Reduced worries about the economy is one bullish factor.
Tony Crescenzi Blog OFHEO: Home Prices Dip Again 7/22/2008 12:49 PM EDT The differences with the Case-Shiller index are instructive in finding the real number.
Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market,
first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.
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