-
-
Re: PIMCO reckon treasury rates going up
I reckon he's gonna be extremely right.... Its about the most no brainer of a trade as when EJ identified gold was when it was at $250.00.... When you go to zero, there is almost no more down side... -
Re: PIMCO reckon treasury rates going up
If we have another crisis, I would think money would go pouring into Treasuries . . . .Originally posted by karim0028 View Postraja
Boycott Big Banks • Vote Out IncumbentsComment
-
Re: PIMCO reckon treasury rates going up
Housing's (hardly) Invisible Hand...more from the boyz at PIMCO
April 12 (Bloomberg) -- Investor demand for mortgage-backed securities will keep U.S. home-loan rates down after the Federal Reserve ended its purchases of the debt, said Pacific Investment Management Co., manager of the world’s biggest bond fund.
The Fed’s unprecedented program to buy $1.25 trillion of the securities that guide home-loan costs stopped U.S. housing prices from falling, Scott Simon, who is in charge of investing in the notes at Pimco, wrote on the company’s Web site. Pimco is among the fund companies that sold mortgage bonds to the Fed, and many money managers began 2010 “underweight” these assets, the report said.
“If and when we see mortgages cheapen, we expect to see private institutions stepping in to buy,” Simon said. “Lower- priced homes bottomed last year. Higher-priced homes should bottom later this year.”
The Fed helped narrow the extra yield that mortgage bonds pay over government securities with its purchases in the $5.4 trillion market of securities guaranteed by government-supported Fannie Mae and Freddie Mac or federal agency Ginnie Mae. The central bank began buying home-loan bonds in January 2009 to restrain financing costs amid the worst housing slump since the 1930s, and it finished the purchases in March.
Narrowing Spread
Yields on mortgage bonds backed by the government fell relative to Treasuries in the first full week of trading after the Fed ended its purchase program, bolstering credit for housing as the economy begins to create jobs.
Fannie Mae’s 30-year mortgage bonds yielded 63 basis points more than Treasuries as of 6:22 a.m. in London, according to data compiled by Bloomberg. The spread was as wide as 2.38 percentage points in March 2008 as credit markets froze around the world.
U.S. 30-year fixed-mortgage rates were 5.2 percent as of April 9, according to Bankrate.com in North Palm Beach, Florida. They have been as high as 5.74 percent and as low as 4.85 percent over the past year.
Home prices in 20 U.S. cities rose 0.3 percent in January, indicating the housing market is stabilizing as the economy expands, based on the S&P/Case-Shiller cost index.
The Fed’s pledge to keep its target for overnight bank lending near zero will also help mortgage securities because it encourages investors to look for higher-yielding assets elsewhere, Simon said in the report.
Economic conditions warrant “exceptionally low” borrowing costs for an “extended period,” the central bank said on March 16 after its last meeting. It has kept the target for overnight lending between banks in a range of zero to 0.25 percent since December 2008.
Fed Impact
The Fed’s decision to end its purchases won’t be good for the market, said Roger Bridges, who oversees the equivalent of $11.2 billion as head of bonds at Tyndall Investment Management Ltd. in Sydney.
“If you take a big buyer out of the market, spreads may widen,” he said. “People looking for home loans will have to pay higher rates, and that obviously won’t be good for the housing market.”
Simon said an increase in yield on mortgage-backed securities by as little as 0.15 percentage point “could spark a flurry of buying,” according to his report.
Investors are also betting that plans by Washington-based Fannie Mae and Freddie Mac in McLean, Virginia, to buy delinquent loans from securities they guarantee will return cash to holders who will invest the money back in the market, said Paul Norris of Dwight Asset Management Co.
Far From Recovery
“Spreads are probably going to hang in there for a little bit,” said Norris, who oversees $15 billion as a senior money manager at the Burlington, Vermont-based firm he joined from Fannie Mae last year.
The U.S. housing market is still far from a recovery, Simon wrote. “If one labels recovery as prices rising dramatically, we do not foresee that anytime soon,” he said in the report.
Pimco’s $220 billion Total Return Fund has handed investors a 3 percent gain this year, beating 72 percent of its competitors, according to data compiled by Bloomberg. The fund had 17 percent of its assets in mortgage securities as of February, dropping from 86 percent in February 2009, according to its Web site.
Simon’s Mortgage-Backed Securities Fund is up 3.72 percent in 2010, outpacing 94 percent of its peers, the data show.
Pimco, based in Newport Beach, California, had $1 trillion in assets under management as of Dec. 31 and is a unit of Munich-based insurer Allianz SE.
http://www.bloomberg.com/apps/news?p...=a6Vz3isZrQaQ#Comment
-
Re: PIMCO reckon treasury rates going up
See, Pimco says so.Originally posted by don View Post
Time to get the little lady a house Jay.Comment
For a concise, readable summary of iTulip concepts developed over the past 16 years and a vision of a challenging next decade and how to navigate it, read Eric Janszen's book "Post Catastrophe Economy".
Join the discussion of today's events with a wide range of professionals with an interest in economics and finance. Register to join our 50,000 plus member registered community from 78 countries today.
Subscribe to iTulip Select for access to the longest running, deep, accurate, and unvarnished macro economic trends analysis and forecasting available, since 1998.
- If this is your first visit, be sure to check out the FAQ by clicking the link above. You may have to register before you can post: click the register link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below.
Working...
Tweet
Comment