Mortgage outperformance continued last week due to several factors, including the release of the Fannie Mae Mega report, inversion of the swaps curve, low volatility and limited supply.

Flows were noted as two-way, with real money showing limited buying interest and better profit-taking activity, while fast money - including servicers - were better buyers. Their interest picked up sharply on Wednesday, along with dealers, with the release of the Fannie Mae Mega report showing that banks might have bought $10 billion in 5s. Asia also started to show more interest with buying noted in 5s through 6s. It appears originator selling has picked up a bit and is around its average of $1 billion per day.

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