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Annaly Capital Management, Inc. Message Board

  • reitsbyziggy reitsbyziggy Jul 29, 2011 2:12 PM Flag

    Question on Existing Repos & Haircuts

    If the haircut on repos is increased does it only apply to new repo contracts or does it filter into all existing unmatured repo contracts? In other words does the haircut PERCENTAGE survive the life of the contract or can it be changed before maturity? I realize if the value of the collateral declines a margin call can happen and therefore more collateral must be pledged.

    In this environment there appears to be two different risks...the first being a change in haircuts; the second being the change in value of the MBS securities.

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    • As I understand it, collateral calls apply to the total outstanding value.

      You don't get a call from your broker to send in more cash in line with higher margin requirements on only what you bought yesterday, do you?

      For a corporate example, think back to the AIG case, where Goldman Sachs kept calling for billions more on collateral.

 
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