Fannie, Freddie CDS auction timeline

Ok I'm still confused... if $93 is .93 cents on the dollar, for example, why then were there bids over $100 from Banc of America Securities, Goldman Sachs, and Merrill Lynch Government Securities?

(From the final results)

Originally posted by Ian McLean
Ok I'm still confused... if $93 is .93 cents on the dollar, for example, why then were there bids over $100 from Banc of America Securities, Goldman Sachs, and Merrill Lynch Government Securities?

(From the final results)

Under the "physical settlement requests" section? Those aren't bids amounts; those are firm offers to buy at the final determined price.

Originally posted by anachryon
Under the "physical settlement requests" section? Those aren't bids amounts; those are firm offers to buy at the final determined price.

No, under the "Limit Orders" sections. Especially, the Fannie Mae Subordinated.

Originally posted by Ian McLean
No, under the "Limit Orders" sections. Especially, the Fannie Mae Subordinated.

Ahhh okay. Those aren't bids either; those are orders placed to buy or sell (depending on which delineation used) at a certain price. I can't be positive here, but those +100 orders may be sell orders. I can't see any reason why anyone would consider buying mortgage-related debt at a higher price than value!

reply to post by anachryon

Ah I see... there's multiple sections to the limit orders. After the midpoint is fixed by the first round of inside market ranking/pairings, the marketable offers are fulfilled (indicated by the limit orders with ** by them). Then, second and subsequent rounds take place, until everything's all gone. The limited orders that get fulfilled there are indicated by only a single *, or a ^ for a partially filled order.

So even though the over-100 limit orders wern't fulfilled, they pretty much guaranteed that the price would go up up up after the first round (if more rounds were needed) -- and that particular auction ended out at the rather-strange 99.9 price.

See, this stuff isn't so hard to understand!

www.boston.com...

Your CDs primer right here. Oh the joy of running a hedge fund.

I just wanted to share this: the amusingly-titled "Plain English Summary" of the Fannie-Freddie CDS auction procedure:

www.isda.org...

Excellent and informative Thread.So we should have a very interesting next week I guess.I am guessing that the ripple effect of all this auctions will be seen soon.

[edit on 9-10-2008 by Nairda]

Just a reminder: the Lehman Bros CDS auction is set for tomorrow morning bright & early.

WSJ

On the heels of similar auction processes for Fannie Mae, Freddie Mac and Washington Mutual late last month will be the expected Friday settlement for buyers of about $400 billion of protection on Lehman Brothers debt.

For now, traders in the equity market are concerned about the prospects for the settlement, adding that its uncertainty is casting a dark cloud over the most likely holders of the debt — big banks such as Morgan Stanley, Goldman Sachs and J.P. Morgan Chase.

This Lehman credit default swaps settlement auction will likely be one of the most expensive payouts in the history of that market, something the government is certainly keeping an eye on.

Morgan Stanley took a big hit on the Dow today, dropping nearly 26% - investors getting out before the inevitable, perhaps?