Not really, the rates were dominated by risk. The rise in spreads of basically all debt, not just mortgage backed debt, against Treasuries is due to the perceived risk. The main reason rates are as low as they are now is that the Fed has traded about 1/2 its 800B supply of treasuries for toxic debt. That keeps the debt price up and the rates lower. This bailout now trades even more treasury debt for mortgage backed debt, this time it's on all of our portfolios, not just the Fed's.
It's hard for me to imagine how this can prevent the further popping of the R/E bubble. The treasury will be easier to negotiate refinancing with, so that will keep some distressed properties off the market. But there is still a huge overhang of unsold properties, plus a generous helping of undistressed property owners who will unload if they perceive the market to be ready for another leg down. They aren't going to be convinced to hold just because the government guarantees a mortgage for somebody.
The real tragedy in all this is the continuation of the dilution of the U.S. Treasury. Already there were not enough future taxes to pay for obligations and we've just made that situation much worse.
Thank you as always for the insightful comments. Do you see the possibility of a bond market collapse from this bailout?