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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: GNMA Date: 2/14/2007 5:18 PM
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Here is what an offering of a GNMA looks like. I think you can do better in CDs.

Charles Schwab & Co. Inc., is pleased to announce the
availability of the following new issue Taxable Offering:


Issuer Name: Government National Mortgage Association GNMA II
Issuer Description: G2 3953. Cusip 36202EMA4. Available on
schwab.com. New pool with 1.0 factor, subject to availability.
Government National Mortgage Association (GNMA) or "Ginnie
Mae" is an agency of the U.S. government. The agency buys
qualified mortgage loans, securitizes the loans, and distributes
the securities. Ginnie Mae pools are backed by the full faith
and credit of the U.S. Government."Average life” is the
average number of years that each dollar of principal remains
outstanding. It represents the amount of time it takes to
receive back approximately half of your principal. This
estimate can vary with interest rates and is based on prepayment
assumptions that may or may not be met. "PSA" is a
benchmark used to evaluate mortgage prepayment speeds. Investors
may experience a gain or loss due to prepayment of obligations,
and will receive back part or all of their investment before
maturity. See www.ginniemae.gov for additional information.
Type Of Bond/Security: Asset/Mortgage-backed Security

Investment Amount: 25000 Face Min/1000 Face Increments
Coupon Rate: 5.50%
Expected Offering Price: 100 PAR
Anticipated Yield to Average Life: 5.512%
Anticipated Average Life: 7.737 years
PSA Speed Assumption: 195 PSA
Anticipated Final Maturity: 2/20/2037
Payment Frequency: Monthly
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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19789 of 35400
Subject: Re: GNMA Date: 2/14/2007 5:33 PM
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Shyeah. Penfed pays more than that on a 7-year CD (although you don't have the opportunity for capital gains).

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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19794 of 35400
Subject: Re: GNMA Date: 2/15/2007 9:59 PM
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The GNMA is offered at par. You aren't going to get any capital gains on that, either, if you hold to maturity. If you don't, there might be capital gains or capital loss, depending on market fluctuations.
Are interest rates going up or down over the next 30 years? Yes.
Is 5.5%, guaranteed by the government as to timely payment of interest and principal, and fully taxable, a great rate? I don't think so. Plus there is the risk of early repayments. If interest rates go down, there will be early repayments. If they go up, you're stuck with a 5.5% investment for the better part of 30 years.
And a whole brand new GNMA costs $25000.

Best wishes, Chris

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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19800 of 35400
Subject: Re: GNMA Date: 2/16/2007 10:31 AM
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Chris

You got it. Peronally, I think if one is interested in exposure to GNMA's, a fund is a better bet (e.g. Vanguard's), but to everyone their own poison.

brucedoe

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