Mortgages were off to a very poor start for December. This is despite the news that the Federal Reserve would be purchasing $500 billion of MBS over the next several quarters, announced just before the Thanksgiving holiday.

A strong flight-to-quality was in place as negative economic data and outlooks were released. The trade was further strengthened last Monday following comments made by both Fed Chairman Ben Bernanke and by U.S. Treasury Secretary Henry Paulson. Bernanke's remarks caused the 10-year Treasury bond, which was already up a point on the day, to increase over another point. This happened after the Fed chairman mentioned the possibility of buying "longer-term Treasury or agency securities on the open market in substantial quantities" to help influence mortgage rates.

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