Zu Fannie Mae & Freddie Mac (we all love them now) mT

verfasst von Schlangenfuchs, 21.05.2000, 02:35

Eine interessante Zusammenstellung zu einer Frage, die sich Trader stellen müssen, wenn die Fed in ihren Minutes ankündigt, die Schulden der Agencies genauer unter 'die Lupe' (LOL) zu nehmen.

Link: http://biz.yahoo.com/rf/000519/n19563285.html

Text:

Friday May 19, 4:06 pm Eastern Time

Agency market unshaken by Fed's collateral study
By Lynn Adler

NEW YORK, May 19 (Reuters) - Market participants on Friday downplayed any speculation that the Federal Reserve's decision to study how to adjust U.S. money supply as Treasury issuance shrinks would undermine the growing role of agency debt.

``The study is obviously necessary for the Fed in order to determine all the forms of collateral it accepts'' as Treasury issuance ebbs, said Gemma Wright, director of market strategy at Barclays Capital.

But Wright said the Fed's decision, announced in the Federal Open Market Committee minutes for the March meeting released Thursday, was widely anticipated in the market so had not affected agency debt prices.

``These were March (FOMC) minutes, and in April it was known in the marketplace, so it hasn't had any impact at all.''

The Fed manipulates the amount of money in circulation by buying and selling Treasury securities, which are fully backed by the government and highly valued Triple-A debt on Wall Street.

But the U.S. is wiping out up to $30 billion of its debt, using budget surpluses to buy back high-yielding securities. To boost liquidity, the Fed has been using agency and, more recently, mortgage-backed debt to supplement Treasuries in its daily market operations.

Market participants doubted that the Fed's study suggests that the government is wary of endorsing Fannie Mae (NYSE:FNM - news) and Freddie Mac (NYSE:FRE - news) debt as an alternative to Treasuries as a market benchmark.

Agency securities remain vulnerable to any political shifts that would mean new regulations, or a rebuke to their current lofty Triple-A rating. But strategists doubt the Fed will decide to reduce its use of agencies in open market operations as a result of its study.

The ``Fed is re-examining how it conducts their open market operations in entirety,'' said Gerald Lucas, senior government strategist and director at Merrill Lynch. The study ``is not pro-agencies or anti-agencies.''

The Fed will ``definitely'' keep using agencies and mortgage-backed securities in term repurchase agreements, which are temporary reserve adjustments, he said. ``When the time comes, they may expand in order not to favour one (type of collateral). What the Fed may very well do... may be to include high-grade corporates also....''

If the Fed were to use other spread products in its outright purchases, such as a coupon pass which adds reserves permanently to the banking system, it would be giving more of a signal that it endorses that debt as a benchmark alternative, strategists said.

``If they did that, it would be a big difference -- that's a de facto approval,'' Lucas said.

Fannie Mae spokeswoman Janice Daue, said ``we always would like to be considered one of the alternatives in an era of declining Treasury issuance, but it's not our position to comment or interpret the Fed's minutes.'' Ultimately, the marketplace will decide what benchmarks it chooses, she added.

Freddie Mac officials were not immediately available for comment.

Agency debt marginally trailed behind Treasuries on Friday. But traders cited stock market weakness, wider swap spreads and a heavy dose of corporate debt as the culprits.

``With shrinking Treasury supply, there are no other alternatives'' than to assess the viability of spread products, said Robert Walton, managing director of agency trading at Nomura Securities International Inc.

``There was not any bit of new news'' in the FOMC minutes, he said. ``But the market is so defensive and so cautious right now, the momentum is clearly toward wider spreads'' until the market adapts to supply imbalances and political risks."

mit Gruss


Schlangenfuchs

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