The Bond Market Association recently held a conference call with MBS dealers and originators to discuss the creation of a hybrid ARM TBA program. After previous attempts have proved unsuccessful, analysts from dealerships said that investors would benefit from the improved price transparency and ability to purchase ARMs resulting from the development of a TBA market, while others are not hopeful that a liquid and reliable program could actually come to fruition.

"From the point of view of traders that need to hedge, a liquid TBA contract would serve as an ideal hedging vehicle," analysts from Countrywide Securities said. "However, we are not optimistic that a TBA product can be created with the necessary liquidity and reliability to make it useful to hedgers, i.e., to make traders comfortable in shorting it."

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