Banks have been expanding their borrowing from Federal Home Loan Banks by approximately 200 billion dollars over the past three months, suggesting increased demand for home loan advances as banks turn to the Fed's lending facilities.

The Federal Reserve and U.S. Treasury are operating with conflicting policy objectives: the Fed is tightening financial conditions through rate hikes and balance sheet runoff, while the Treasury is proposing buyback programs to stabilize the bond market, effectively 'turning on the humidifier while turning on the dehumidifier at the same time.'

The Federal Reserve has historically changed monetary policy direction (from tightening to cutting) approximately 7-8 months after stopping rate hikes, demonstrating a pattern of policy reversals that undermine credibility.

In 2008-2009, the primary stress in financial markets was credit risk (defaults on subprime mortgages and complex structured securities), but in the current period, the stress is liquidity risk and interest rate risk, not credit risk.

Ginnie Mae 2 mortgage-backed securities with 2% coupons were issued in April-May 2020 when 10-year Treasury yields were 50 basis points, were heavily traded then, but are now undesirable because mortgage rates have risen to 3.2% on 2-year mortgages, making the older 2% securities economically unattractive and illiquid.