MBS UPDATE: Sittin Sideways

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The yield curve continues to steepen post TBAC/Refunding Announcement...

The MBS stack isn't taking guidance from anyone but the Fed though...we remain flat on the day.

 

FN30_________________________                GN30______________________

FN 4.5 -------->>>> +0-01 to  100-18             GN 4.5 -------->>>> +0-00 to  100-23

FN 5.0 -------->>>> -0-01  to  101-18             GN 5.0 -------->>>> -0-02 to  101-26

FN 5.5 -------->>>> -0-02  to  102-07             GN 5.5 -------->>>> -0-02 to  102-13

FN 6.0 -------->>>> -0-02  to  102-30             GN 6.0 -------->>>> -0-03  to  102-26

 

This morning the Treasury Department also announced new guidance on executive pay for the financial institutions that are receiving government assistance.

Here are President Obama's remark's...

"For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only bad taste-it's bad strategy-and I will not tolerate it as president,

Here are a some excerpts from the press release....

 

  1. Companies Receiving Exceptional Financial Recovery Assistance: 
  • Limit Senior Executives to $500,000 in Total Annual Compensation - Other than Restricted Stock:   Current programs providing exceptional assistance to financial institutions forbid recipients of government funds from taking a tax deduction for senior executive compensation above $500,000. Today's guidance takes this restriction further by limiting the total amount of compensation to no more than $500,000 for these senior executives except for restricted stock awards.
  • Any Additional Pay for Senior Executives Must Be in Restricted Stock that Vests When the Government Has Been Repaid with Interest:  Any pay to a senior executive of a company receiving exceptional assistance beyond $500,000 must be made in restricted stock or other similar long-term incentive arrangements.  The senior executive receiving such restricted stock will only be able to cash in either after the government has been repaid - including the contractual dividend payments that ensure taxpayers are compensated for the time value of their money - or after a specified period according to conditions that consider among other factors the degree a company has satisfied repayment obligations, protected taxpayer interests or met lending and stability standards. Such a restricted stock strategy will help assure that senior executives of companies receiving exceptional assistance have incentives aligned with both the long-term interests of shareholders as well as minimizing the costs to taxpayers.
  • Executive Compensation Structure and Strategy Must be Fully Disclosed and Subject to a "Say on Pay" Shareholder Resolution:  The senior executive compensation structure and the rationale for how compensation is tied to sound risk management must be submitted to a non-binding shareholder resolution. There are no "Say on Pay" provisions in the existing programs.
  • Require Provisions to Clawback Bonuses for Top Executives Engaging in Deceptive Practices:   Under the existing programs providing exceptional assistance, only the top five senior executives were subject to a clawback provision.  Going forward, a company receiving exceptional assistance must have in place provisions to claw back bonuses and incentive compensation from any of the next twenty senior executives if they are found to have knowingly engaged in providing inaccurate information relating to financial statements or performance metrics used to calculate their own incentive pay.
  • Increase Ban on Golden Parachutes for Senior Executives:  The existing programs providing exceptional assistance to financial institutions prohibited the top five senior executives from receiving any golden parachute payment upon severance from employment, a ban that will be expanded to include the top ten senior executives.  In addition, and at a minimum, the next twenty-five executives will be prohibited from receiving any golden parachute payment greater than one year's compensation upon severance from employment.

 Require Board of Directors' Adoption of Company Policy Relating to Approval of Luxury Expenditures:  The boards of directors of companies receiving exceptional assistance from the government must adopt a company-wide policy on any expenditures related to aviation services, office and facility renovations, entertainment and holiday parties, and conferences and events. This policy is not intended to cover reasonable expenditures for sales conferences, staff development, reasonable performance incentives and other measures tied to a company's normal business operations. These new rules go beyond current guidelines, and would require certification by chief executive officers for expenditures that could be viewed as excessive or luxury items. Companies should also now post the text of the expenditures policy on their web sites

To read the entire press release CLICK ON ME