Bond Funds Want Government to Continue Backing Freddie and Fannie

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Bond funds trading mortgage backed securities, which are in large part ultimately backed by the US taxpayer, don’t want the government backstop to go away.

(From Bloomberg.com)

“The government needs to play a role in housing,” said Daniel Hyman, a money manager specializing in mortgage securities at Pacific Investment Management Co., manager of the world’s largest bond fund. “The way the world is set up, it can’t purchase $5 trillion of additional mortgage assets without government guarantees, or at least certainly not anywhere near today’s prices.”

“or at least certainly not anywhere near today’s prices.” That’s a key point. The mortgage market is dangerously manipulated. Without “government guarantees” the system doesn’t work for Wall Street. Or Newport Beach in this case.

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