And I think that’s bode well. That’s definitely been a benefit during this most recent period without bank participation. So I would say that given the weather quite a storm, I would say I’m reasonably optimistic. I don’t think you’re going to see a material move, but I just don’t think that it’s going to be more of a slow, gradual positive performance, I guess, I would say.
Hunter Haas: Yes, I agree with that. And I think that, you know, there’s a large bifurcation in the specified pool market between some of the lower coupon universe that was produced over the course of the last 10 years or so that has been popping up on these liquidations and the more recently produced current coupon assets. I don’t have a high degree of confidence that what’s been produced in the last year and a half or so is in the specified pool form is going to be particularly great in terms of convexity protection both in a rally or a sell-off. And the other side of that coin is the older stuff is, I think very attractive from a convexity viewpoint. There’s not a lot of pay up in that universe because it’s such a discount, huge upside into a big rally and not a meaningful amount of extension into a continued sell-off or inflation scare or something. And I think that those comments, can be seen in our positioning as well.
Robert Cauley: Yes, I would just add to that is they’re easier to hedge. We talked about the ability to use the inversion of the curve to lock in longer-term funding. But when you’re earning something, owning something of an $86 or $84 price, it really can’t extend a lot, so you can use longer-term or treasuries to hedge. But also, with respect to the more recent production current coupon, if you look at the collateral that’s being produced, the gross whacks are extremely high. Now, they’re running 95 to 105 basis points over the net coupon. So, if you’re buying a 6, it’s a low 7 or a very high 6 gross whack. I mentioned primary, secondary spreads are very wide, and they may be for a while, but if the market ever turns and goes the other way and the mortgage banker industry has to re-engage, there’s a lot of low-hanging fruit out there to go after.
And that stuff is going to exhibit poor convexity, because in a rally it’s not going to tighten material, because speech is going to be fast as they move into a bigger, premium position. And they’re just going to really inhibit their upside, especially relative to, as Hunter just mentioned, the lower coupons, which have very favorable convexity. So, you know, it’s somewhat painful in this environment to continue to have such a bias, and we have mitigated that some. But we just think, net, net long-term, that that’s where you want to be. And it’s obviously always a challenge to try to time the market. You know, you can’t just say, well, I’ll just sell out of all those high coupon mortgages when the market turns. You don’t get an email the day before it happens and say, I’ll sell out.
It’s kind of hard to do.
