excellent point - there could be a black swan that drives TNX to 1.5 from 1.841 (diff of 34 bps) but that doesn't mean mtg rates which are keyed off the TNX will drops the same amount. my guess is they'd drop 10 bps - maybe.
remember unlike the spx, the mtg rate can vary from bank to bank - the price of spx will not vary from bank to bank or broker to broker. if a bank feels there is too much risk lending at a low spread they won't do it - they'll just keep reinvesting in treasuries w/ ZERO risk which is what they've been doing.
