I have already spoken about how bad the action is on the long end of the Treasury Curve. What is more telling is the action within the mortgage market itself.
Investors are very concerned that mortgage services and desks are selling Treasuries to help hedge the declining value in their Mortgage Backed Securities as rates continue to rise.
The Mortgage Market got hammered yesterday as investors have started to realize the above referenced scenario. The losses were truly stunning as spread and swap spreads were blown out.
This combined with another round of housing price roll overs is not good for primary mortgage origination. Forget for the moment the Bernanke/Geithner REFI RUSE they are trying to portray, this sets up for a very interesting (Painful) summer.
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