The story currently in mortgages is the very favorable technicals, low volume, and range bound market. On top of these are: improved rolls, a decline in dealer inventories, and bank interest. According to the New York Federal Reserve, net dealer positions as of April 12 dropped to $12.4 billion from $25.4 billion, and are at levels similar to January and February. The Federal Reserve also reported MBS holdings at large banks rose $16 billion as of the week ending April 12. Year-to-date, MBS holdings at large banks are up $54 billion.

Last week mortgages held up very well despite a strong sell-off on Tuesday and Wednesday that moved the 10-year yield from 4.98% as of Monday's close to 5.10% by Wednesday's close. The above factors, however, contributed to market orderliness and kept mortgage flows two-way. Also contributing to the calmness is the limited hedging needs of servicers at this time as the mortgage market is near full extension.

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