Check out the graph below. It's a 2 day price curve of MBS overlayed against a 2 day price curve of treasuries.
SO much less volatility in MBS.
SO much more resilience (tendency to hold steady while tsy's fluctuate). Take a moment to put yourself in the psychological shoes of the capital market investor. What does that smoothness indicate to you? Why might you be more likely to go with a much more stable and even buying pattern of MBS regardless of what stocks and bonds are doing?
One possibility is that investors, cash crunched though they may be, are simply trying to get as much money as they possibly can into MBS which would signify the slow and underwhelming inception of the "trickle" of optimism we've been waiting for to be created by Bailout 2.0.
This is still a bit early, and we could well face some choppiness, but the VIX hit 80 today and the dow was all over the board. And despite a huge gain in stocks, we lost almost no ground. This edifies the proposal above. Eith each passing day that this "slow and steady wins the race" price curve, the more certain we can be that we are on our way to a better place.
Stay Tuned...