Bloomberg reports,

The difference between yields on Fannie’s two-year debt and two-year Treasuries narrowed 18 basis points to 75 basis points, the lowest since Sept. 19, data compiled by Bloomberg show.

The article says that Fannie mortgage-backed securities are trading at 158 basis points over 10-year Treasuries, and the yields on the securities are at record lows. Presumably, the only reason that mortgage rates for borrowers are not at record lows is that Freddie and Fannie are taking a bigger spread (profit margin) than usual.

Could it be that there are investors out there who are willing to buy something other than short-term Treasuries? Will there be a stampede back into non-government bonds that is as mystifying as the stampede out?

I’ve been saying that the mortgage securities market is a dead parrot. The joke will be on me if the parrot starts to fly.