Activity focused around the conventional 5 roll last week with the coupon attracting strong buying from just about everybody - dealers, fast money, and money managers. In mid-week comments from JPMorgan Securities, analysts noted the strength in 30-year 5s is supporting the entire MBS market. With the monthly production being bought by a "small cadre" of real money investors, these appear to be held in repo instead of rolling, analysts said, supporting the scarcity value.

Merrill Lynch analysts are advising holders of FNMA 5s to roll their securities now rather than later, "as there is still a lot of specialness in the roll and it seems too early in the cycle for the roll to trade this high."

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