Response to the Federal Reserve's first auction designed to address liquidity concerns via financings that allow a greater range of collateral seems to indicate that liquidity concerns have dissipated somewhat. The response to the Fed auction Thursday suggests that "financing needs are less dire than expected," according to Noah Estrin, mortgage-backed securities trading strategist at RBS Greenwich Capital. Also suggesting that the "flight to quality" in the market has diminished is the increase in the benchmark 10-year Treasury yield to around 3.5%, according to Yahoo Finance. During the latest round of liquidity concerns, the benchmark yield was closer to 3.3%.
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