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Financial markets remain under considerable stress as the mortgage-induced stampede to quality continues unabated. Equity markets have been reeling and quality spreads in corporate bond and mortgage securities markets have been widening once again. Indeed, even key money-market quality spreads have widened out again.

On this round, investors have even soured on the debt and mortgage-backed securities issued by Fannie Mae and Freddie Mac, pushing out spreads between “prime conventional conforming” mortgage rates and yields on comparable-maturity Treasuries to the widest in many years.

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