One perversely pleasant sign in this deepening credit panic: on Friday, frightened investors began to buy top-quality mortgages as fast as Treasurys, and the lowest-fee 30-year loans fell toward 6.5 percent.

In the prior two weeks, the failure of mortgage yields to follow Treasurys was worrisome for three reasons: it looked as though all mortgages had become toxic; second, a hallmark of a really bad credit crunch is a lock-up extending to AAA paper (which Fannies and Freddies certainly are); and lower fixed rates are crucial to offset the very rapid re-pricing and/or outright removal

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