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Subject:  FNM Date:  9/17/2002  7:20 PM
Author:  solasis Number:  227 of 297

FNM's largest creditor JPM reported a large an unexpected loss today and showed it has little reserves...Fitch downgraded jpm to A which will pose a lot of problems for FNM's need for credit as it tries to hedge its large portfolio. S&P and Moody's will probably follow.

Got lost in the shuffle with JPM news but today freddie mac decided to stop adding mortgage assets to its balance sheets thus possibly starting the chain reaction that will lead ultimately to the mortgage market siezing up - so if you want to refi i would do it soon.

fannie is still building its portfolio and they are allegedly short 5 and 10 year treasuries to balance their duration exposure while at the same time spread traders and hedgers are also short treasury 5s and 10s and long the ends (2s and 30s)...the spread has reached 4 standard deviations now and with JPM news there is blood in the water. hold on to your seat this is going to get interesting and although the timing is still in doubt it increasingly looks to me like the high water mark is in.

enter stage left alan greenspan.

tr

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