The dominant theme in last week's MBS market was rolls, with the settlement for 30-year conventional MBS and the limited supply pushing 30-year Fannie Mae 5.5s and 6s through fail levels. January rolls are already on fire and expected to remain special for 30-year FNMA 5.5s.

Analysts at JPMorgan Securities estimate the float in 5.5s is around $44 billion, net of CMOs, and predict at least another $30 billion will be added in January, of which one-third will be taken out by CMOs. In addition, JPMorgan expects strong demand from indexers as 5.5s increase, as well as strong demand from buyers reinvesting heavy paydowns. So there's a good chance, the firm said, that the FNMA 5.5 roll will again be at or near fail in January.

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