is this true ?

[patientrenter]

The Chinese aren’t taking any extra default risk buying GNMAs instead of Treasuries. Principal repayment of both is fully guaranteed by the federal government.

I wouldn’t pay attention to his rank… The Chinese know he’s just the delivery man.

I think this is just one more piece of a multi-pronged effort to prop up house prices. Some important people won’t be re-elected, and some financial managers and private investors will get burned, if this effort turns out to be ineffective or half-hearted. They may have more success or less. We’ll just have to see.

Patient renter in OC

[patientrenter]

The Chinese aren’t taking any extra default risk buying GNMAs instead of Treasuries. Principal repayment of both is fully guaranteed by the federal government.

I wouldn’t pay attention to his rank… The Chinese know he’s just the delivery man.

I think this is just one more piece of a multi-pronged effort to prop up house prices. Some important people won’t be re-elected, and some financial managers and private investors will get burned, if this effort turns out to be ineffective or half-hearted. They may have more success or less. We’ll just have to see.

Patient renter in OC

[greekfire]

I wonder if our government sees an opportunity to haggle with China in light of their recent quality snafus. If you buy some of these, we’ll continue to buy some of those. Do we even have any leverage with them anymore?

[greekfire]

I wonder if our government sees an opportunity to haggle with China in light of their recent quality snafus. If you buy some of these, we’ll continue to buy some of those. Do we even have any leverage with them anymore?

[bsrsharma]

“The Chinese aren’t taking any extra default risk buying GNMAs instead of Treasuries. Principal repayment of both is fully guaranteed by the federal government.”

Then why can’t the Treas. Sec. place a few calls to his pals at JPM or Goldman and fix it. After all he is a wall street bigwig himself. Another question is, if the statement is true, why doesn’t the market just take care of it automatically? I am sure Alphonso isn’t passing the hat in China for treasuries yet (I hope)

“I wouldn’t pay attention to his rank… The Chinese know he’s just the delivery man.”

If it is minor issue, why need a delivery man? Standard tools of international diplomacy (financial attache at embassy etc. http://www.ustreas.gov/press/releases/js2961.htm

) should have sufficed.

“I think this is just one more piece of a multi-pronged effort to prop up house prices”

Isn’t GNMA mostly for FHA/VA housing? They are mostly smaller loans and shouldn’t upset the apple cart too much.

[bsrsharma]

“The Chinese aren’t taking any extra default risk buying GNMAs instead of Treasuries. Principal repayment of both is fully guaranteed by the federal government.”

Then why can’t the Treas. Sec. place a few calls to his pals at JPM or Goldman and fix it. After all he is a wall street bigwig himself. Another question is, if the statement is true, why doesn’t the market just take care of it automatically? I am sure Alphonso isn’t passing the hat in China for treasuries yet (I hope)

“I wouldn’t pay attention to his rank… The Chinese know he’s just the delivery man.”

If it is minor issue, why need a delivery man? Standard tools of international diplomacy (financial attache at embassy etc. http://www.ustreas.gov/press/releases/js2961.htm

) should have sufficed.

“I think this is just one more piece of a multi-pronged effort to prop up house prices”

Isn’t GNMA mostly for FHA/VA housing? They are mostly smaller loans and shouldn’t upset the apple cart too much.

[patientrenter]

bsrsharma, JP Morgan and Goldman have full control over where to invest their own equity, but it’s only a drop in the bucket compared to the Chinese or Japanese FX reserves. Beyond that, the banks manage other people’s money, or lend to other people, and have some influence over the investments but are subject to other people’s will. If JP Morgan starts investing my money, sitting in their fund, in too many GNMAs that I don’t like, I am going to bail.

Why wouldn’t market forces trigger large purchases of GNMAs if they have the same guarantees as Treasuries? Not necessarily, because the two bonds differ in other respects – the time of repayment. If the biggest single buyer is buying only one type of bond, the market forces linking the prices of the two bonds can be stifled. (The price of convexity will be driven higher than in a ‘natural’ market, driving up yields on the GNMAs and rates on new home loans generally.)

Would getting the Chinese to buy more GNMAs ‘fix’ the housing market? Not at all. But if it’s one of 20-30 coordinated efforts going at once you might get some results.

Patient renter in OC

[patientrenter]

bsrsharma, JP Morgan and Goldman have full control over where to invest their own equity, but it’s only a drop in the bucket compared to the Chinese or Japanese FX reserves. Beyond that, the banks manage other people’s money, or lend to other people, and have some influence over the investments but are subject to other people’s will. If JP Morgan starts investing my money, sitting in their fund, in too many GNMAs that I don’t like, I am going to bail.

Why wouldn’t market forces trigger large purchases of GNMAs if they have the same guarantees as Treasuries? Not necessarily, because the two bonds differ in other respects – the time of repayment. If the biggest single buyer is buying only one type of bond, the market forces linking the prices of the two bonds can be stifled. (The price of convexity will be driven higher than in a ‘natural’ market, driving up yields on the GNMAs and rates on new home loans generally.)

Would getting the Chinese to buy more GNMAs ‘fix’ the housing market? Not at all. But if it’s one of 20-30 coordinated efforts going at once you might get some results.

Patient renter in OC

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