jswede

When Markets Break

this is just wrong.

Felix is comparing agency/gov't mortgage PASS-THROUGH security spreads to fixed term debentures of Tunisia and Panama.

Pass-throughs trade much wider because the investor takes on pre-payment risk of principal. The investor sells call options to the issuer for basis points in spread.

"Long-dated", 30yr, FNMA debt (debentures - the apple-to-apple comparison) trade at around 5.20% today. That's a spread of about 72 basis points over the 30yr UST.

No real story here. MBS is cheap, but it's not emerging market cheap.