Market Update 5/12/2008

Mortgage and Lending with CYPRESS MORTGAGE

Treasuries fell as stocks rallied after HSBC Holdings Plc's first-quarter results added to

evidence the worst of the credit-market losses may have passed, reducing the appeal

of holding the safest assets. HSBC set aside provisions for bad U.S. loans that were

smaller than some of the largest estimates. The yield on the 10-year note climbed 3

basis points to 3.80 percent by 7:30 a.m. in New York, according to bond broker

BGCantor Market Data. The price of the 3 7/8 security due May 2018 fell 8/32, or

$2.50 per $1,000 face amount, to 100 21/32. The yield on the benchmark two-year

note rose 4 basis points to 2.27 percent. It may advance as much as 60 basis points,

or 0.6 percentage point, in the next month, Garvey predicted. HSBC increased as

much as 2.7 percent in London today, helping the FTSE 100 Index to a 0.8 percent

gain, after Europe's biggest bank by market value set aside $3.2 billion for bad loans

in the U.S. and said first-quarter profit was higher than a year earlier. Some analysts

had predicted loan losses of $4.6 billion in the U.S. consumer finance business. The

market is .125 to .25 worse in discount this morning.

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