Tuesday, February 24, 2009

Good news recap (7)

Agency spreads are down significantly. The difference between the yield on debt issued by Fannie Mae and Treasury debt of comparable maturity is a measure of the degree of trust investors have in the U.S. government's willingness to stand behind Fannie's debt. Although these spread still indicate a degree of doubt on the part of the market, they are nevertheless substantially lower than when the market first realized that Freddie and Fannie's debt, measured in the trillions of dollars, might be worthless. This is very important, since it has calmed the nerves of foreign investors, among others, who held massive amounts of Agency debt.

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