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Global instability increases the demand for U.S.-demonimated bonds as a "safe haven".  The fall in mortgage rates today is partly attributed to a potential military coup in Thailand and ongoing riots in Hungary. 

The issue in Hungary is that government officials lied about the economy to the public, in hopes of winning the April elections. 

The Times Online highlights excerpts of the confessions from Hungarian Prime Minister Ferenc Gyurcsany to members of his Socialist Party in May.  It's pretty interesting to see politicians owning up to "mistakes" with such openness.

"I almost died of having to pretend for the past year that we were actually governing. Instead we lied day, night and evening. I don’t want to do this anymore. Either we go ahead and then you have a leader or you have to pick somebody else."

"Look. The thing is, in the short run there is no choice. Janos Veres [the Hungarian Finance Minister] is right. We can muck around a bit longer, but not much. The moment of truth has come swiftly... Reform or failure. There’s nothing else. And when I’m talking about failure, I’m talking about Hungary, the left, and very honestly, about myself."

"There aren’t many choices. There aren’t, because we f***ed up. Not a little, a lot. There is no other country in Europe that has shown such stupidity as we have."

Wow.  That is some serious openness. 

As a casual observer, I can't help but think that investors will think twice before investing in Hungarian business, or the Hungarian forint.

Fewer dollars earmarked for Hungary (and Thailand) equals more dollars likely to end up in U.S. bonds, included mortgage-backed securties. 

Naturally, more demand for mortgage bonds lowers mortgage rates.

Extracts from the Hungarian PM's 'lying' tape
Times Online.com, September 19, 2006
http://www.timesonline.co.uk/article/0,,13509-2365151,00.html

Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.