With the recent selloff, the catch phrase in the mortgage market last week was extension risk as Street research devoted many pages to the topic.

For instance, in a report released Monday, Lehman Brothers said that considering the cuspy nature of the mortgage market, the risks toward the extension side are "staggering." The report said that for a 100 basis points increase in rates, analysts are actually projecting the duration of the MBS Index to extend by $650 billion in 10-year equivalents.

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