Royal Bank of Scotland: Short U.S. Government Debt, Buy Fannie Mae

This is the same RBS that put out the "Global Crash Alert". From Bloomberg:

Investors should buy default protection on U.S. Treasuries as the odds increase that the government will have to bail out Fannie Mae and Freddie Mac, analysts at RBS Greenwich Capital Markets told clients today.

The possibility that the Treasury could lose its top AAA credit rating if it's forced to bail out the two government- sponsored enterprises will likely cause credit-default swaps on government debt to widen while contracts tied to the senior debt of Fannie and Freddie narrow, Kenneth Hackel, the managing director of fixed-income strategy at RBS Greenwich in Greenwich, Connecticut, said in an e-mailed note to clients today.

``It was only a couple of months ago that Standard & Poor's came out and said that if they had to do a full-blown bailout, they could see taking down the rating on the U.S. Treasury,'' Hackel said in an interview today. ``And then how wide would it get? A lot wider than it is now.''>>>MORE