Much of the information I consume arrives via email. Like it or not, email is still an effective way to digest information. I don't feel 'compelled' to hit my RSS reader everyday. I am compelled to hit my email, obsessively and daily.
One of the subscriptions that catches my attention regularly is via http://ratealert.com and is written by a guy that goes by the nickname "Hammer". He sent out an interesting piece today about Bond Rollovers. I don't think he'd get upset if I republish here. I recommend getting on his email list. Check out RateAlert. ~ JB
What is a Bond Rollover? ~ Jason 'Hammer' Helmer
Well, it's an event that happens around the 10th of every month at
which time the current month's coupon is closed out and any new
loans are placed with next months coupon.
PLAIN ENGLISH:
When lenders are selling the mortgages that we originators close,
they are selling them forward to be delivered. So if you close a loan
in June, they are pricing that into July's coupon. The Rollover
is when we start promising coupons to be delivered into the next
coupon, in our example's sake for August. There are multiple coupons
running at a time (confusing isn't it?) so we adjust our tracking to the
proper coupon. The new price is what investors are paying for that
month's coupon. We don't have to worry about that affecting the rate
sheet, that is the bottom line.
REMINDER/BOTTOM LINE: The adjustment was accounted for before
we opened. Any positive or negative movement on the day is just like
normal - watch your PRI and keep a strong eye out for all your alerts.
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