Secondary Markets Rally

It's Friday... according to the Pres. we got 4 days before we "run out of money to pay our bills..." If this were true, I think the bond markets would be reacting with disfavor towards the U.S. Government issuing and we would see yields rising on interest rates as investors sold.

Point in fact the bond market is thriving, with yields reaching new lows. The 10 year is currently paying 2.85%.... this benchmark has paved a smooth path for the mortgage backed securities market which is currently up 20 ticks in early trading. I should emphasize early, we could see a sell off this afternoon as profit takers reap the rewards of a market that has reached yearly highs once again.

How this market is holding, scratch that, improving is something that sort of makes sense, but doesn't make any sense. As the equity markets bleed (approaching 12,000 on the DOW) investors are looking for safety, so they're running in flocks to the bond market. An interesting fact which could leave many burned if we get slapped with a down grade. Then again, the idea of a downgrade may be baked in (I don't really think this to be true) already. Probably not, but you never know, and if you honestly try and find a better long term safe investment where do you go in the world right now? It's on fire. So whether investors like it or not, MBS and Treasuries may be as good as it gets, and if that's the case better rates are coming in the short term.

Don't read this incorrectly. I still strongly believe higher interest rates are on their way, and when they hit, it's going to be with a vengeance. A locust invasion comes to mind. Get while the getting is good.