Mortgages performed well last week as the previous week's sell-off moved the market to a higher yield range. The 10-year yield moved above 4.70% following the strong revisions made to the employment report after falling to 4.57% on Nov 1. While the market experienced a moderate rally last week, the 10-year remained above 4.60% resistance and mostly held to the middle to upper end of the 4.60% to 4.70% range. Month- to-date, Lehman Brother's MBS Index is up 14 basis points with year- to- date at 101 basis points in excess return.

Flows over the week were mostly supportive with wide ranging interest from domestic real and fast money, overseas, and servicers, and directed mostly down in coupon. Tuesday was helped by nearly $38 billion that became available through paydowns. From Friday's (Nov. 3) close through Wednesday's close, FNMA 5s and 5.5s were up 17/32nds and 13/32nds, respectively, while 6s and 6.5s rose just 8+/32nds and 4/32nds. Dwarfs saw increases ranging from up 12/32s in 4.5s to up 5+/32s in 6s. The 10-year Treasury, meanwhile, was up 20 ticks over the period.

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