24 lipca 2011

Agency MBS - co stanie się po obcięciu ratingu US z AAA na AA?

Wersja wpisu minimalistyczna (ich udział wzrośnie z uwagi na brak chętnych do jakichkolwiek tłumaczeń...).
Last week, Standard & Poor's Ratings Services placed its AAA long-term and A-1+ short-term sovereign credit ratings on the US on CreditWatch with negative implications. S&P said that there is at least a one-in-two likelihood that it could lower the long-term rating on the US within the next 90 days. After putting the sovereign debt of the US on CreditWatch, S&P did the same for Fannie Mae, Freddie Mac and other government entities because of their reliance on the US government. S&P commented that the CreditWatch action reflects its view of the following two issues:
  • Continuing failure to raise the US government debt ceiling so as to ensure that the government will be able to continue to make scheduled payments on its debt obligations.
  • The likelihood that Congress and the Administration will agree on a credible, medium-term fiscal consolidation plan in the foreseeable future.
[...] S&P may lower the long-term rating on the US by one or more notches into the 'AA' category in the next three months, if it concludes that Congress and the Administration have not achieved a credible solution to the rising US government debt burden and are not likely to achieve one in the foreseeable future. Although the market appears to be assigning a very low probability to the US government defaulting on any of its obligations, there is a lot of nervousness in the MBS market about the possibility of the US sovereign rating being downgraded to AA. Here, we focus on the following issues: What is the likely direction of interest rates and implied volatilities if the US sovereign debt rating is downgraded? Our Interest Rates Strategy team believes that how a downgrade or other credit action takes places will influence market reaction. If the event takes place on the same day of the debt ceiling extension, we would expect around a 15-30bp backup in rates[...] Our rates strategists also highlight that rating agency downgrades of Japanese government bonds have not resulted in higher rates and in the long run rates actually transition back to being driven by economic fundamentals. What sort of rating actions in the agency MBS market should be expected if the US sovereign debt rating is downgraded? S&P also put agency securities on a ratings watch. We think investors should be thinking about the following:
  • What sort of rating actions in the MBS market should be expected if the US sovereign debt rating is downgraded? For instance, would FN/FH MBS be rated higher than US sovereign debt/GSE debt because MBS are collateralized by mortgages? Note that the MBS issued by FN and FH are not actually rated by S&P and Moody’s currently although their long-term and short-term debt securities are rated.
  • Would FN/FH MBS be rated better than GN MBS because FN/FH MBS are backed by better collateral?
  • Will there be a variation in ratings across different MBS pools depending on collateral characteristics?
In the event of a US sovereign debt downgrade, we think it is almost certain that Fannie and Freddie debt ratings would be cut to the same level as US sovereign debt. Based on the agency MBS trust indenture, in the event of a default by FN or FH, the Trust takes delivery of mortgages and hence agency MBS cash flows should be treated as “collateralized” by mortgages1. We are not sure at this time how the rating agencies will factor in the credit quality of underlying mortgages while rating agency MBS. On July 18, S&P commented that its placement of the sovereign credit rating on CreditWatch negative does not necessarily lead to changes in the rating or outlook on similarly-rated nonfinancial corporate issuers in that country. Who are the investors that may be forced to sell MBS if MBS ratings are downgraded –hedge funds / REITs/ dealers / overseas investors? First let us look at how the haircuts and repo rates are likely to change if the debt rating is downgraded. [...] If the US sovereign debt rating is downgraded to AA, the haircut on agency MBS repos will likely increase to 4-6% and the funding rate will be at least marginally higher. We don’t think that this rise in haircuts will lead to material selling of agency MBS by leveraged investors like hedge funds, REITs and dealers, but a ratings downgrade below AA could lead to negative demand-side technicals for agency MBS from the same investors. Second, how are GSE portfolios impacted by a ratings downgrade? Currently, a meaningful portion of assets on GSE retained portfolios are funded by short-term liabilities. Thus, if the spreads on GSE short-term liabilities widen and/or money market funds that are holding onto short-term debt of the GSEs decide to sell, GSEs could be sellers of agency MBS. Note that a money market fund's ability to purchase or hold a rated security depends on the issuer's short-term credit rating and unless the major credit rating agencies also downgrade short-term debt issued by Treasury and other federal agencies, money market funds would not be affected by any change in the AAA rating of the long-term debt. In addition, the recent comments from the Investment Company Institute (ICI) suggest that credit rating agencies would have to cut their ratings on short-term US government securities steeply, by an amount roughly equivalent to eight steps on the long-term rating scale, to force money market funds to sell short-term liabilities. Thus, we don’t expect that GSEs will be forced to shed agency MBS because of the sovereign rating downgrade being considered by S&P. How will capital requirements for banks change following a ratings downgrade? Currently, FN/FH MBS are assigned a 20% risk weighting while GN MBS are assigned a 0% risk weighting. Our understanding is that claims on sovereigns and their central banks have a 0% risk weighting for AAA to AA- rating and a 20% risk-weighting for A+ to A- rating. Considering that the ratings downgrade being considered by S&P is not below AA-, risk weighting on GNMA MBS and Treasuries should not be impacted. Similarly, risk weighting on FN and FH MBS will also remain at its current level of 20% unless their rating goes below AA (There is no difference between the risk weights for AAA and AA bonds). However, if the rating agencies start assigning different ratings on mortgage pools based on credit characteristics of underlying mortgages, risk weightings on super premium coupon mortgage pools may be higher than those on lower coupon MBS pools

3 komentarze:

  1. Tłumaczenia nie są większości potrzebne :).

    Ciekawe, jak rynki zareagują w przyszłym tygodniu. Osobiście - intuicyjnie - spodziewam się scenariusza jak po tsunami w Japonii: ostro w dół, i ostro w górę [po porozumieniu].

  2. Wbrew pozorom brak "dealu" może być pozytywny dla giełdy (ucieczka dolarów z obligacji w akcje).

    Przyszły tydzien jest o tyle ciekawy, że jest podaż 99 mld USD(!) a w czwartek aukcja obligacji włoskich.

  3. BarCap o AAA


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