Thursday, May 21, 2009

30 Year Mortgage - The Real Riskless Investment

The spread between the 10 Yr UST and the 30 Year current coupon mortgage index has collapsed to the tightest level in 2009. If the selloff in 10 Year bonds continues for another 68 bps (at this rate that would be achieved in about 3 hours), it will be cheaper to finance a mortgage compliments of bankrupt Fannie and Freddie, than to issue US Sovereign debt.

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