Recall that big investors were getting very little for their money back in the early part of this decade when interest rates where at 1%. The appeal of an MBS yielding 5 or 6% or a CDO with even more was just to great to pass up. Seems like new bubbles are being formed in emerging markets and the public sector. EM's have the growth and treasuries offer a nice spread for banks who are borrowing at near zero and buying a 30 year for 4.5%. A nice spread considering the normal 3 6 3 model. Not too smart in the long term but banks really aren't thinking about that, just pure survival right now.