It looks like your browser does not have JavaScript enabled. Please turn on JavaScript and try again. Ginnie Mae's Statement. Learn More. Are you a homeowner. Giving first-time homebuyers a helping hand. Ginnie Mae funds the government loan market so millions of people can buy, refinance, or rent homes. Keeping up with the new market. We are improving the way we operate to make Ginnie Mae more competitive in the new market. Focused on affordability for 50 years.
Supporting America's veterans. Ginnie In Brief. Your hub for industry insights and market updates, direct from Ginnie Mae's leadership. This can be seen in chart 3 below where the price of the 10 year and 30 year Treasury notes experienced greater swings than the prices of 30 year Ginnie Mae bonds over the years.
Source: Freelunch. Investors should also be aware of the currency risk involved when investing in Ginnie Mae securities. This is because these mortgage-backed securities are denominated in US dollars. Thus the exchange rate between the US dollar and the Singapore dollar have to be taken into account.
Investors will gain when the US dollar appreciates because their investments will be worth more when they are converted back to Singapore dollars. However, investors may suffer a loss when the Singapore dollar appreciates against the US dollar. This is because the same amount of US dollars will now be worth less when converted back to Singapore dollars. Below is a chart of how the Singapore dollar has moved against the US dollar over the last 26 years.
Source: Singapore Department of Statistics. Singapore investors in a Ginnie Mae fund would have been delighted if they started investing in the fund 5 years ago. This is because from January to December , the Singapore dollar fell by some This means that currency risk would have worked for the Singaporean investor increasing his returns by some However, this trend of the Singapore dollar depreciation against the US dollar may not continue in the next 3 to 5 years.
Looking at history over the longer term period of 27 years, between the year and , the Singapore dollar has appreciated by about So the overall trend of the Singapore dollar has been to appreciate against the US dollar. So, there is a possibility that the Singapore dollar may reverse its falling trend over the last 5 years and start to rise instead.
A possible scenario of a rising Singapore dollar is supported by the strong current account surplus that Singapore has, in comparison to the current account deficit that US is faced with. A strong current account surplus means that Singapore is in a net revenue position relative to other countries. Hence, other countries have to change money to Singapore dollars in order to buy the exports from Singapore. This means that there is a greater demand for Singapore dollars on an operating basis which will then lead to a gradual appreciation of the Singapore dollar.
A rising Singapore dollar versus the US dollar causes currency risk to work against Singapore investors. We now look at 3 scenarios to determine the potential returns that investors can expect from Ginnie Mae securities over the next 3 years. The 3 scenarios are: 1 if interest rates remain constant, 2 if interest rates decrease, and 3 if interest rates increase. When interest rates remain constant, there is no interest rate risk and prepayment risk.
The current yield to maturity of Ginnie Mae securities in the Franklin Templeton's fund is about 6. However, a fund that invests solely in Ginnie Mae securities may have a slightly lower return due to charges such as annual management fees. Again, given the same current yield to maturity of 6. In addition, investors should also be aware that prepayment risk increases in periods of declining interest rates. This involves inflation outpacing investment returns, with the result that investors lose spending power.
Investors with shares in Ginnie Mae bond funds do not have to worry about late payments or mortgage defaults reducing their dividend checks because Ginnie Mae honors these payments when the actual mortgage borrowers fall behind on their payments.
However, the actual value of shares in the fund rises and falls over time based upon factors including the value of the underlying loans. Investors are guaranteed to receive steady income payments , but there are no guarantees they will get their principal back if they sell a bond to another investor before it matures. Ginnie Mae helps to keep the nation's housing market moving by offering guarantees on securitized loans.
The cash inflow from investments in these funds helps to create new lending opportunities, and this means there are always new mortgages coming into the investment market that Ginnie Mae can use to create new funds. However, interest rates on loans vary over time, and when rates are rising shares in existing funds will fall as investors flock to newly issued bond funds with higher yields.
When interest rates are falling, investors start refinancing their existing loans. When this happens, the yields paid on Ginnie Mae funds drop because old higher-rate loans are replaced with newer, low-rate loans.
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