As spreads for mortgage-backed securities reached their widest levels in three weeks, many market participants saw last week as an opportune time to buy.

"Things have picked up a little bit, I really get that sense," said one MBS trader. "Even though there is still pressure on, activity levels are picking up. Banks have been very active in buying short PACs and short whole loans. Banks are coming in, looking to invest money before quarter end. Banks want to carry a lot of liquidity over year-end because of Y2K, but any investments they want to make they want to make early, just like issuers."

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