A bailout has been rumored for quite some time. There have been a couple instances in the past few months where news outlets have reported that a weekend deal

A bailout has been rumored for quite some time. There have been a couple instances in the past few months where news outlets have reported that a weekend deal is imminent, but nothing ever came. The mortgage basis (i.e. the difference in yield between mortgage-backed bonds guaranteed by Fannie/Freddie and Treasury notes) has compressed quite a bit in recent weeks, indicating a lower expectation of risk because market participants have been expecting a deal. But yesterday when the news hit, mortgages didn't really do much... we sold off a couple ticks and the basis tightened by 2 basis points or so, but that was it. In short, the bond market won't treat this as news until some concrete announcement comes out -- it's already been priced in. It's only the common equity holders who are reacting, since any deal will likely wipe them out.