Jason Y retweetledi
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Jason Y
317 posts
I can't believe this but covered this at $SPY 658.36! & reshorted at 670.08! What the hell is going on...
GlobalMacroZen@GlobalMacroZen
I guess there are some news, I got filled on my $SPY 665.90 shorts; I was expecting good news by the way as you can see on my feed..
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@EconstratPB This is the key. There may be LDI bid for a true 50yr cash flow. But the neg convexity on 50yr mtges will be awful. These borrowers will refi at first opportunity to lower rates or shorter terms. So I don’t know who the natural buyers of 50yr mtges are
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50 is whole different aninmal in terms of the benchmark and the prepayment option.
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A 15 and a 30 are not too dissimilar bc they both use the 10yr treasury as a benchmark.
Most people stay in a home 7-10yrs so 10s are an appropriate benchmark.
Laptop Mercenary@maceskridge
@EconstratPB I have been quoted identical interest rates by banks for 15 and 30 year mortgages, so unfortunately this falls into the bell curve meme structure. Banks can create money out of thin air for free then sell mortgages so yield curve matters less than it should
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@brandonjcarl And who are the natural buyers? Unlike a 50yr or century bond, the prepay option and neg convexity won't be appealing to the LDI bid given cashflow uncertainty; borrowers will be very efficient in refinancing into lower rates and/or shorter terms.
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A 50-Year Mortgage saves you $300 per month on a $1 million loan. In return, you'd pay 2.5 million in interest instead of 1.2 million.
30-Year @ 6.25% = 6,157/mo
50-Year @ 6.75% = 5,286/mo
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@EconstratPB Seems like a terrible idea. Lower monthly payment but also slower pace in building equity. And investors will hate it because of the prepay option and neg convexity you mentioned (not actual 50yr cashflow, no LDI bid).
And why stop at 50? Why not 100 or perpetual IO then?
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Good point. If the 50yr mortgage is effectively an IO, and equity buildup is slow, then you’re effectively renting under the pretense of owning.
What do you own? 50yrs of interest!
Responsibilities of ownership without the equity payoff until you’re almost dead.
Hugo Manenti@HugoManenti
@AjaxHamiltonian @EconstratPB Fair. I'd expect the people taking them to be overall less able to prepay, but inflation might help. Still looks a lot like an interest-only mortgage to me
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Jason Y retweetledi
@BlacklionCTA Noooooo. We have to make it change. I'll do my part.
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@TopSekret3450 Fed - why do you hate futures but prefer SPX options? Optionality + convexity?
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@MacrostratPB What about the gold futures long, David? Still holding onto it?
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@MacrostratPB Roughly 20%-30% margin usage on pairs basket - does that smell right David?
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@MacrostratPB On short vol what kind of strikes and expiry are you looking at? 5% 10% OTM put spread?
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@Fullcarry Agency MBS traded poorly too. 5-6bp wider vs IG “only” 2 bp wider. Heavy money manager selling esp near end of day, consistent with your color
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Price action today definitely had the hallmark of liability driven investors (pension, insurance etc) rebalancing back into stocks vs the long-end. Big giveaway was the 4 pm dump in USTs
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@EconstratPB You are long SPY and long EFZ (inverse ETF)
One up 9.5, one down 7.8. Add not difference
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Two objects starting at the point. One moves left 7.8 units. The other right 9.5 units. The diff between he two is 17.3 units.
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Subs happy. That’s just today.
Up 9.5% since 19th (when I said short RoW) vs SPY -7.8% = 17.3% outperformance.
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@EconstratPB Shouldn’t it be addictive? 9.5 vs 7.8 = 1.7% outperf?
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@MacrostratPB Any interest in shorting VIX via futures or ETF here?
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@MacrostratPB If fintwit is right (goods trade deficit divided by their exports = voodoo math), then it makes me really pessimistic about U.S. outlook, both outright and vs RoW. Banana republic stuff
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@MacrostratPB Yup understood. Shorting some form of SPY strangle? Or short put / put spreads given you pro risk bias
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