Due to the "herculean" and "unprecedented" efforts of myriad Fed bailouts, Barclays Capital is reporting that, going into the New Year, the systemic risk posed by the securitized markets will be much lower, although the agency mortgage-backed securities (MBS) market remains a concern. Further, increased investor due diligence, the implementation of stress testing and the realization of losses on these investments by banks, will all help create a much less risky securitization market, from a systemic point of view. "2010 promises to be an exciting year," they write. "It will just not be the heart-pounding, spine-chilling excitement that we saw in early 2009; and for that, we should be thankful." With all of this taken into consideration, the analysts are predicting the 2010 rate of growth, above Fed predictions, at 3.5% to 4%. There are some down sides to the report: "For example, while mortgage rates are near all-time lows, mortgage credit has tightened in the past year, blunting the benefits of record low rates," write the analysts in their outlook for the secondary market. "Losses in non-agency loans are set to be a drag on bank balance sheets for the next few years, and we expect commercial mortgage losses to pick up steam from 2010." They add that the expect rates to begin to climb, and the Fed to begin to walk away from asset purchases come March. They also expect rising demand from banks to help offset the resulting $1.7trn in duration demand. This creates a picture of stability as long as inflation can be kept in check, according to economist who contributed to the report. "That is why we are calling for a relatively mild sell-off; the forecast shows the 10-year Treasury rising only to 4.5% – a 100bp move over 12 months," they write. "This kind of rate move should not unduly distress securitized investors."