Comments on: Kuwait revalues (again) http://blogs.cfr.org/setser/2007/07/25/kuwait-revalues-again/ Wed, 07 Jan 2009 23:04:19 +0000 http://wordpress.org/?v=2.6.1 By: HZ http://blogs.cfr.org/setser/2007/07/25/kuwait-revalues-again/#comment-98037 HZ Wed, 25 Jul 2007 16:16:17 +0000 http://blogs.cfr.org/setser/2007/07/25/kuwait-revalues-again/#comment-98037 re: MBS If you bought straightforward MBS loan pools, even the subprime ones didn't do so badly. Around Feb/Mar meltdown time the discount on whole loans were about 3-4% depending on the originators. If you bought lesser tranches of CDOs with leverage, OTOH, we all know what happened to the Bear funds when creditors came calling. re: MBS
If you bought straightforward MBS loan pools, even the subprime ones didn’t do so badly. Around Feb/Mar meltdown time the discount on whole loans were about 3-4% depending on the originators. If you bought lesser tranches of CDOs with leverage, OTOH, we all know what happened to the Bear funds when creditors came calling.

]]> By: bsetser http://blogs.cfr.org/setser/2007/07/25/kuwait-revalues-again/#comment-98036 bsetser Wed, 25 Jul 2007 05:50:33 +0000 http://blogs.cfr.org/setser/2007/07/25/kuwait-revalues-again/#comment-98036 twofish -- the us survey data and the tic data both do indicate that someone in china has been buying corporate debt, a category in the us data that includes MBS that lack an agency guarantee. and all the anecdotes suggest chinese names have been buying so called private MBS (tho i always assumed they were buying the higher rated tranches). it must be SAFE, the banks or some other financial institution. twofish — the us survey data and the tic data both do indicate that someone in china has been buying corporate debt, a category in the us data that includes MBS that lack an agency guarantee. and all the anecdotes suggest chinese names have been buying so called private MBS (tho i always assumed they were buying the higher rated tranches). it must be SAFE, the banks or some other financial institution.

]]> By: Twofish http://blogs.cfr.org/setser/2007/07/25/kuwait-revalues-again/#comment-98035 Twofish Wed, 25 Jul 2007 05:20:07 +0000 http://blogs.cfr.org/setser/2007/07/25/kuwait-revalues-again/#comment-98035 Also, not only do the GSE's not do subprime mortgages, they also insure their securities against defaults by the mortgagee. If someone defaults on their home loans, then Freddie Mac, Fannie Mae, and Ginnie Mae guarantee payment. In the case of Ginnie Mae, those gurantees are backed by the "full faith and credit" of the United States. In the case of the other two, they have credit lines with the Federal government. Also, not only do the GSE’s not do subprime mortgages, they also insure their securities against defaults by the mortgagee. If someone defaults on their home loans, then Freddie Mac, Fannie Mae, and Ginnie Mae guarantee payment. In the case of Ginnie Mae, those gurantees are backed by the “full faith and credit” of the United States. In the case of the other two, they have credit lines with the Federal government.

]]> By: Twofish http://blogs.cfr.org/setser/2007/07/25/kuwait-revalues-again/#comment-98034 Twofish Wed, 25 Jul 2007 05:14:31 +0000 http://blogs.cfr.org/setser/2007/07/25/kuwait-revalues-again/#comment-98034 Professor Yi is a bit confused since Ginnie Maes, Freddie Macs, and Fannie Maes don't have any subprime component in them. Also, I don't see how any non-financial Chinese corporation can get the approval from SAFE to buy MBS's. Professor Yi is a bit confused since Ginnie Maes, Freddie Macs, and Fannie Maes don’t have any subprime component in them. Also, I don’t see how any non-financial Chinese corporation can get the approval from SAFE to buy MBS’s.

]]> By: bsetser http://blogs.cfr.org/setser/2007/07/25/kuwait-revalues-again/#comment-98033 bsetser Wed, 25 Jul 2007 05:10:00 +0000 http://blogs.cfr.org/setser/2007/07/25/kuwait-revalues-again/#comment-98033 definitely off-topic, but sort of interesting -- are Chinese banks (using funds raised through swaps with the PBoC) among those who bought MBS? definitely off-topic, but sort of interesting — are Chinese banks (using funds raised through swaps with the PBoC) among those who bought MBS?

]]> By: Dave Chiang http://blogs.cfr.org/setser/2007/07/25/kuwait-revalues-again/#comment-98032 Dave Chiang Wed, 25 Jul 2007 04:23:50 +0000 http://blogs.cfr.org/setser/2007/07/25/kuwait-revalues-again/#comment-98032 Off-topic, Asia Times Online reports that the past surge in US Dollar purchases of US mortgage bonds comes from Chinese corporations, not the Chinese PBoC Central Bank http://www.atimes.com/atimes/China_Business/IG26Cb02.html Yi Xianrong, a senior economist and finance professor with the Chinese Academy of Social Sciences, a central government think-tank, attributed the previous surge of mortgage-backed securities bought by Chinese companies to inexperience in conducting risk assessments and their miscalculation of the US property market. "After seeing how the property prices in China kept soaring, these Chinese companies never thought of the US property market as having problems and they bought a lot of mortgage-backed securities, particularly in the past two years," Yi told Asia Times Online. "Apart from underestimating the level of risk, the better returns offered by MBS over US Treasury bonds also made the Chinese investors unable to judge the high risk of the US mortgage market." Off-topic,

Asia Times Online reports that the past surge in US Dollar purchases of US mortgage bonds comes from Chinese corporations, not the Chinese PBoC Central Bank
http://www.atimes.com/atimes/China_Business/IG26Cb02.html

Yi Xianrong, a senior economist and finance professor with the Chinese Academy of Social Sciences, a central government think-tank, attributed the previous surge of mortgage-backed securities bought by Chinese companies to inexperience in conducting risk assessments and their miscalculation of the US property market.

“After seeing how the property prices in China kept soaring, these Chinese companies never thought of the US property market as having problems and they bought a lot of mortgage-backed securities, particularly in the past two years,” Yi told Asia Times Online. “Apart from underestimating the level of risk, the better returns offered by MBS over US Treasury bonds also made the Chinese investors unable to judge the high risk of the US mortgage market.”

]]> By: Economista Non Gratia http://blogs.cfr.org/setser/2007/07/25/kuwait-revalues-again/#comment-98031 Economista Non Gratia Wed, 25 Jul 2007 04:03:10 +0000 http://blogs.cfr.org/setser/2007/07/25/kuwait-revalues-again/#comment-98031 First !!!! First !!!!

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