Big bond investors say Fed plan works -- for now

The Federal Reserve's move to unfreeze panicky U.S. credit markets failed to assuage bond investors, with some of the biggest fixed-income investors braced for further credit deterioration in the market.

On Tuesday, the Fed said it will lend up to $200 billion of Treasury securities to banks for 28-day periods in return for debt including a range of mortgage-backed securities -- the root of the current credit crisis -- as collateral.

That news did send the yield premium on Fannie Mae MBS down 15 basis points to 2.151 percentage points over comparable Treasuries, but not before it hit its widest level in more than 20 years on Thursday, at 2.37 percentage points.

Mounting foreclosures and defaults along with further rating downgrades remain the clear and present danger.