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iShares 20+ Year Treasury Bond Message Board

  • aza718 aza718 Oct 6, 2012 9:12 PM Flag

    I have a question... Why would any bank lend 30 year mortgage for 3.5% if they can get 3% on the 30 year bond?

    Can anyone explain? A lot of posters here seem to think that 30 year yield will rise to say 3.5 area. 30 year bond is much more safe than lending to the public as mortgage, right? What am I missing?

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Its not about risk management. Banks don't care about risk because they can dump all the crap on the US government. Rather, banks are required to buy treasuries in exchange for the Fed taking the toxic MBS off their bogus balance sheets. Must have a load of horse manure inside those banks.

    • Banks immediately re-sell most of their mortgages on the secondary market (for example, to Fannie Mae). So instead of interest they receive service fees (for servicing the loans - collecting payments, etc). This is much better than treasuries because a) you get your money back and can use it again; and b) you don't have any interest rate risk.

      Sentiment: Strong Sell

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