The Chinese are buying MBS again

[Slimprofits]

http://www.businessweek.com/news/201...mura-says.html

Chinese investors added U.S. government-backed mortgage securities and so-called agency debentures in December, signaling the country may be anticipating further purchases of housing debt by the Federal Reserve, according to Nomura Securities International analysts.

The $9.5 billion rise reported today in China’s holdings in the debt came as the nation dumped $33 billion of long-term Treasuries, according to New York-based analysts at the Japanese bank. The category includes home-loan bonds guaranteed by Ginnie Mae and the Federal Home Loan Bank system’s unsecured notes.

[ProdigyofZen]

Re: The Chinese are buying MBS again

Hey Slim, good find.

GNMA, FNMA and FHLB loans are really different than MBS. MBS was part of the problem, the FHLB loans etc were not. It was mortgage backed securities that were packaged and sold to pension and investment funds as triple A rated debt that became the problem. Just going to keep this simple.

In MBS or RMBS land you have different types like HEQ (home equity bonds), Alt-A and Subprime (this is the paper that got everyone in trouble). Unfortunately it is confusing in the sense that the GNMA paper is classified as MBS.

I remember trading some HEQ paper anywhere from 1 cent on the dollar to 35 cents on the dollar to 85 cents on the dollar 2-3 years after the collapse. A lot of that paper is still traded at those levels even now in 2012. From 2008 to 2011 I was a trader at a broker/dealer trading distressed debt.

[don]

Re: The Chinese are buying MBS again

in related news (from Zero Hedge) . . .

Americans Dump The World, As The World Dumps America



It is only appropriate that in the days after Valentine's day, the theme of dumping is revisited. Specifically that of securities. As was pointed out yesterday following the latest TIC data, there was a lot of dumping of US Treasurys by foreign official authorities, with both China and Russia (but not only) proceeding to sell a demonstrative amount of US paper. However, that is not all. As the first chart below from today's Bloomberg Brief shows, foreign purchases of US corporate bonds has once again rolled over and remains quite week. As Bloomberg notes: "Foreign investors appear to have little faith in the U.S. economic recovery. They sold $20.7 billion of corporate bonds in December, leaving the one-year mean at minus $3.6 billion. That compares with a 12-month average of $47.3 billion in May 2007. Acquisitions of U.S. stocks were also weak. They totaled minus $11 billion versus a 12-month average of $2.1 billion." And in a stunning display of reciprocity, US residents, not content with selling of US stocks as retail outflows soared in December, also proceeded to dump the rest of the world en mass, as the net sale of foreign securities by US Residents soared to an all time high. US Residents "sold $38.9 billion of [foreign securities] on a net basis in December. That compares with average monthly purchases of $9.8 billion over the last year. The breakdown revealed that the headline number consisted of sales of $28.1 billion of foreign bonds and of $10.8 billion of foreign equities." Which makes sense - if decoupling is (transitorily and erroneously) present in the economy, it should also be present in securities flow. As it was in December. Which means that as globalization returns, the reversal in securities flows will have a dramatic impact on target economies, and doubly accentuate the regression to the mean.

World does not like America...




...As Americans do not like the world.

[ProdigyofZen]

Re: The Chinese are buying MBS again

Hum, I think the smart investors realize that all these corporations who are rolling over their higher interest debt into much lower interest date (which has been happening the last 3 years) will someday have to roll over their historically low interest rate debt into ever higher interest rate date. Meaning all that extra cash they have supposedly built up on the balance sheet will be wiped out.

Americans had to sell their equities so they could buy christmas and hanukah gifts