Folks in Industry -- Random Walk 10-year

m2c · Joined: 03 Aug 2005 Posts: 764

OK, if you’ve read the book you recognize the 180 degree difference from the topic title but anyway…

Yet another WSJ article on the 10-year squeeze issue. Appropriateness of the use of the 10-year as a proxy for MBS yields may be fading. Two questions:

1. Do you know of any good free site for MBS pricing – next month and following month obviously preferred but rolls have been VERY narrow lately. Generally I tell customers who haven’t committed to a house or are far out on the feasible refinance scale to “with caution” follow the 10-year. Recently the movements of the 10-year appear to be almost entirely absorbed by the spread. Public data on Fannie Mae site for the historical net yield is really HISTORICAL – can’t believe the lag. Ecommit is there but you need a Rosetta stone (actually Ecommit1 would be a better indicator).
2. Hasn’t come up yet on the commercial side but clock is ticking. We have a number of deals “in process” and I’m certain there will be a different “spread over” at “lock” from the initial indication due to the indicated manipulation of this treasury maturity. Keeping all the article just in case. Has anyone yet faced this problem?

chow · Posted: Thu Aug 18, 2005 3:31 pm Post subject:

Let me pull out a Crystal Ball, and wrap one of these scarves from my past out...I'm going to wrap it around the 20 pounds of hair, and act like some Soothsayer.

What you're asking us,

Is-

If any of us who know markets- to give up our secrets?

Child, If you learn how to HEDGE, and you do okay...That's a good thing. But to ask this question here?

What- do you know about actual HEDGING?

m2c · Joined: 03 Aug 2005 Posts: 764

Nothing about hedging – just an independent way to potential customers to follow the market either if they’re floating or waiting to buy or pull the trigger for an application. 10-year used to be a fairly good “indication” of market in mortgages. It is the most readily accessible. It the recent past it has been a poor indicator of the MBS market. Looking for some substitute site for MBS pricing for a borrower to view and perhaps time his choices; at a minimum convince them there's no bait and switch

Obviously we all hedge in this industry. Personally we do most in the forward delivery market but those pair offs can be a real "ouch". This is a totally different question than I asked.

m2c · Joined: 03 Aug 2005 Posts: 764

Ops ... left "mandatory" after forward but I assume you would have correctly filled in the blank.

No one can tell where the market is going to go with 100% accuracy; just want to supply customers an independent method to tell where the market is NOW relative to some point in time in the past.

chow · Posted: Fri Aug 19, 2005 8:36 pm Post subject:

I really wish we could tell or advise people to some market in the past-but ....

isn't that how real people in hedging make money? :wink:

I'm going to skate around the ice rink-

You're going to show me how far I can skate, while I learn from you-or I find out how thin your ice is.... Unless you're a SERIES LICENSED ENITY or Broker...You wouldn't entertain this thought. Otherwise...

Unless you're just letting me skate around you thread...

like the Devil I can be.