Free Republic

Three weeks ago, when discussing the failed (yes, failed) Maiden Lane 2 auction by the New York Fed, we said: 'Something quite disturbing happened during today's latest attempt by the Fed to sell $3.8 billion in face amount of Maiden Lane 2 assets: it had a busted dutch auction. In fact, the auction was so massively busted, the New York Fed managed to sell only half of the bonds for sale, or $1.898 billion in 36 Cusips of the total 73 Cusips offered for sale." Subsequently we noted the sudden radiosilence from the Fed on this issue on Twitter. To...

Mortgage backed bonds have a problem. No one is willing to buy them except at a huge discount to their intrinsic value. This is often referred to as a liquidity problem. The liquidity problem is partly the result of being unable to determine the value of modern mortgage backed securities. Mortgage backed securities are bonds that are backed by a pool of mortgages, and there are trillions of dollars in mortgages. We never know ahead of time exactly how many people who buy a house will fail to pay the mortgage, but we have a statistical history that tells us...

South Korea heads for black September as problems pile up for the ailing won American investments threaten currency Leo Lewis in Seoul The deepening woes at Fannie Mae and Freddie Mac, badly stretched central bank reserves and a losing battle to support the won are pushing South Korea towards a full-blown currency crisis this month, analysts have said. Heavy investment by the Korean Government in Fannie, Freddie and other US-related agency bonds has left a potentially huge liquidity problem - perhaps $50 billion (£27.4 billion) - in the foreign reserve portfolio. Some believe that Seoul might have no ammunition left...

BEIJING (Reuters) - China should gradually reduce its holdings of U.S. debt and can stop buying dollar-denominated bonds, a Hong Kong newspaper on Tuesday quoted Cheng Siwei, a vice chief of China's parliament, as saying. With China a leading financier of the U.S. current account deficit, Cheng's comments sent the dollar lower against the euro and yen and also pushed down prices of U.S. government bonds. The Beijing-funded Wen Wei Po daily carried Cheng's comments, made in Hong Kong on Monday, but it was not immediately clear whether they reflected those of top decision makers who determine the content of...