Across the Curve

Miscellany

Mortgages are 2 ticks wider to swaps. They were much wider earlier when the cavalry in the form of fast money buyers emerged.There is no balance sheet as dollar rolls imply funding between 4 percent and 5 percent.

The central bank lowered the target funds rate to 1 ½ percent. The market is still dislocated as funds are trading around 4 ½ percent. (Several high ranking officials at the Federal Reserve have been observed applying for licenses as helicopter pilots.)

The money markets are still frozen and locked down. The only trading remains in the overnight sector. My source in this sector reports that AA banks would issue at levels 50basis points to 100 basis points cheap to libor but at the moment there are no bids against those offers.

Today the Federal Reserve is meeting with money market dealers to discuss the details of the CPFF. There are many still to be answered questions regarding charges and size. Until there is clarification of those ambiguities, the market will remain in its state of suspended animation.