Jan 18.
Is it any wonder that NY Fed’s Dudley last week soothed the market by saying the duration of “extended period” of low rates is from 6 months to two years, just as the markets are wringing their collective hands about the end of MBS QE? Is it any wonder that changes continue to occur with FNM and FRE to spur housing? For example, financing builder construction loans in conjunction with FHA’s that TREASURY PURCHASES (see zerohedge “Sneaky Pete” Jan 15) and allowing a quicker turnaround for rehabbers to sell property. Is it possible that the admin will just allow the agencies to grow their balance sheets and hold new paper in their own portfolios rather than selling to the Fed? With the Fed essentially guaranteeing funding costs to banks, is it surprising that instead of selling off, as one would expect if a major buyer (the Fed) were to drop out, that treasuries rally? It’s altogether possible that banks and agencies merely substitute for Fed purchases of MBS. At the same time, perhaps at the margin, the bid for riskier assets erodes a bit as the truly easy money is made riding the implied safety of the curve.
–In a new development in healthcare debate, unions now dodge the tax on premium health care programs.
–Also, the vacant Kennedy Senate seat election is Tues, with republican Brown now leading…Cramer calling for stocks to rally if Brown wins. Obama has now gone to MA to personally stump for Coakley, but the interesting (and probably flawed) change of strategy is to again point blame at previous Republicans for leaving this mess.
