Mortgage market carnage continues
Yesterday, Thornburg Mortgage said it received a default notice from JPMorgan Chase after it failed to meet a margin call. The notice was on a $320 million loan; the call was for $28 million. This credit event has triggered cross-default provisions on other borrowings, causing Thornburg shares to plunge in the pre-market this morning (to around $1.50 from $3.40 at yesterday's close).
Meanwhile, the mortgage bond fund Carlyle Capital Corp. has announced that it missed four out of seven margin calls totaling more than $37 million. The fund uses a heap of leverage to invest in AAA agency mortgage bonds (bundles of mortgages backed by Fannie Mae and Freddie Mac). As I noted two days ago, the yield spread on those bonds versus comparable-maturity Treasuries has blown out. That reflects forced selling and increasing concerns in the market about mortgage credit quality.
I should point out there are also rumors ... RUMORS ... that UBS blew out a $24 billion portfolio of Alt-A mortgages at "fire sale" prices -- 70 cents on the dollar. Long story short, there's no rest for the weary in the credit markets.
UPDATE: Another rumor recently making its rounds was that the Treasury Department would come out and announce an explicit (rather than implicit) backing of Fannie Mae and Freddie Mac. That caused 2-year note yields to spike up temporarily. CNBC reports that Treasury is denying it. Wild, wild time in the markets to be sure.
Meanwhile, the mortgage bond fund Carlyle Capital Corp. has announced that it missed four out of seven margin calls totaling more than $37 million. The fund uses a heap of leverage to invest in AAA agency mortgage bonds (bundles of mortgages backed by Fannie Mae and Freddie Mac). As I noted two days ago, the yield spread on those bonds versus comparable-maturity Treasuries has blown out. That reflects forced selling and increasing concerns in the market about mortgage credit quality.
I should point out there are also rumors ... RUMORS ... that UBS blew out a $24 billion portfolio of Alt-A mortgages at "fire sale" prices -- 70 cents on the dollar. Long story short, there's no rest for the weary in the credit markets.
UPDATE: Another rumor recently making its rounds was that the Treasury Department would come out and announce an explicit (rather than implicit) backing of Fannie Mae and Freddie Mac. That caused 2-year note yields to spike up temporarily. CNBC reports that Treasury is denying it. Wild, wild time in the markets to be sure.
posted by Mike Larson at
8:42 AM
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