Here is another bit of annectdotal evidence from Ratelink that exempifies the fear that is still reigning in the market. When fear does subside, it will do so quickly.
In times of uncertainty, the safer an investment is perceived to be, the more buying interest it draws. This is one reason the yield on the 10-year Treasury is 2.70%, not too much higher than inflation. Traders are more concerned about the return on their money in turbulent times, not necessarily with yield. Speaking of yield, the Treasury auction of 13-week bills earlier this week carried a yield of .005%, next to nothing. For every $1,000,000 invested, the return will be $5,000 a year or $1,250 for the 13-week period. If the same $1,000,000 was invested in the MBS market, the investor would receive $12,500 dollars in return in the same 13-week period, a 10x increase. This is a textbook example of fear.
So, I go back to what I have been saying. Now is the time to buy, before the tide turns quickly and the excellent deals become harder to come by.
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