Interesting piece written by Richard Duncan today, at John Mauldin’s website. He says the bond conundrum was caused by regulatory tightening of Fannie’s portfolio, causing them to cut back on issuing MBS. Private ABS issuers like Countrywide picked up the slack, issuing 3x as much ABS in that one year period, as usual. He’s got all the charts there to show it. Foreign central banks who wanted AAA+ paper, bought ABS AAA+ paper instead of GSE debt, but if they wanted government debt they were forced to buy existing Treasuries. This pushed up the price, and down the yield, for the period Q1 04 – Q4 05. Interesting stuff.