Tuesday, 30 December 2008

Making money from the TALF

Accrued Interest has a great post on the newly expanded TALF. An edited version follows:
Fed will loan funds for purchase of recently issued ABS. This [means] ABS issued after January 1, 2009 made up of loans no older than October 2007. The ABS must be rated AAA, and be made up of student loans, auto loans, small business loans, or credit cards.

Loans will be non-recourse and not marked-to-market.

The loan term will be up to 3-years.

The loan rate will be set at "yield spreads higher than in more normal market conditions but lower than in the highly illiquid market conditions that have prevailed during the recent credit market turmoil."
So, buy some ABS, repo it to term with the FED. Sit back and enjoy positive carry, no margin calls, and, err, that's it. Gentlemen, start your engines.

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