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Credit Concerns?

One of today's market headlines from a major outlets read something like "... stock market tumble.., treasuries rally .. on concerning credit issues and housing markets getting worse...". If this obvious and convenient explanations can hold any water, we would expect to see the credit products, like corporate bond, agency note and MBS, spreads to treasury should widen comparing to yesterday (obviously not credit concerning day). Well, the prices for agency (FNMA, FHLMC) 15 and 30 yr fixed rate MBS have been rallied along with treasuries and the yield spreads of current coupon 15 and 30 yr MBS to the 10 yr treasury declined from declined from 158 bp and 201 bp to about 134 and 189 bp from yesterday. The agency bullet spread over treasuries were also narrow, and same can be said on corporate bond yield curve too. I had hard time to find the credit "concerns" that lead to today's equity sell-off.

It is our human nature to identify the CAUSE when something happened. Certainly there is no exception for the media reporting on financial markets. The linear relationship between "cause" and "effect" rarely exists except on the textbooks.
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