Market Update 6/30/2008

Mortgage and Lending with CYPRESS MORTGAGE

U.S. Treasuries fell, extending the biggest quarterly decline since 2004, as inflation in

the euro region rose to the highest in 16 years and oil advanced above $143 a barrel.

The retreat pushed 10-year yields up from a three-week low after a European Union

report showed the rate of euro-region inflation climbed to 4 percent. U.S. government

notes dropped 2.2 percent this quarter, their steepest three-month loss since 2004,

according to Merrill Lynch & Co.'s Treasury Master index, as traders bet the Federal

Reserve will raise interest rates to curb price growth. The drop pushed the yield on the

benchmark 10-year note up 2 basis points to 3.98 percent at 8:30 a.m. in New York,

according to BGCantor Market Data. It fell earlier as low as 3.94 percent. The price of

the 3.875 percent security due May 2018 dropped 4/32 to 99 4/32. The two-year yield

advanced 6 basis points to 2.69 percent. Crude oil for August delivery rose as much

as $3.46 to $143.67 a barrel in electronic trading on the New York Mercantile

Exchange. It reached $142.99 a barrel on June 27 after the Fed left interest rates

unchanged at 2 percent. The market is .125 to .25 better in discount this morning.

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