Market Update 7/11/2008

By
Mortgage and Lending with CYPRESS MORTGAGE

Treasuries fell the most in three weeks on speculation the U.S. government won't

allow Fannie Mae and Freddie Mac to fail, reducing demand for the safest assets. Twoyear

notes led the declines after a person familiar with the matter said a takeover of

one or both of the companies is among the options being considered by White House

officials. The declines pared a weekly gain fueled by concern the mortgage lenders will

need an infusion of capital to weather the worst housing slump since the Great

Depression. The yield on the 10-year note advanced 3 basis points to 3.83 percent. It

has fallen 16 basis points in the past week. Fannie Mae slid 14 percent yesterday,

down 67 percent this year, and Freddie Mac declined 22 percent. The mortgage

lenders would have to post pretax losses and writedowns of about $77 billion before

the U.S. would be compelled to start a rescue, according to estimates by Fox-Pitt

Kelton and Friedman, Billings, Ramsey & Co. The market is relatively unchanged to

.25 improvement this morning.

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