Last week mortgages experienced active buying as investors anticipated that the Federal Reserve is close to an end to its rate hike campaign. This was further encouraged by Wednesday's Beige Book report that observed slowing in the economy. Of particular note was the presence of Asian investors after a long dry spell that began in mid-March. They are expected to become even more supportive when the Fed actually pauses.

Though flows initially were up in coupon by midweek they started to reverse course and move down in coupon. JPMorgan Securities strategic principal trader David Montano said that convexity was beginning to take a toll on premiums as the sector struggles with the lack of a steep curve and the level of rates versus the Fed Funds rate.

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