What's Happening Next

How will the FCB's react to the Fed swapping Treasuries with Primary Dealers? Will they still buy agency bonds from Fannie and Freddie? Agency spreads have jumped over the past two weeks... This could be from an FCB boycott, or it could be the result of margin calls on Carlyle, Bear, etc. Most likely, the margin calls are coming as a result of the FCB's not buying.



Fannie Mae 30-year bonds dropped 20 basis points today, but 30-year Treasuries have fallen 8. I need to do some research on how to chart the spread. On top of this, the regulators just lowered capital requirements because leverage of 80 times is not enough.

Time to short Fannie. I'm also looking at buying some gold, through GG. However, I need to close a couple of positions. Probably GS, maybe MER as well.

Just thought of this one... Say you're a dealer and you have MBS you don't want. You go to the Fed and trade them in for Treasuries. Then you sell the Treasuries to xyz central bank and buy more MBS from same FCB. Go to the Fed. Repeat.