The Federal Reserve's targeted buying primarily in the lower part of the coupon stack (4.5s and 5s) has made these coupons rich versus the rest of the stack, FTN Financial analysts said.

This is supported by results of the firm's coupon swap model which shows the 30-year UIC trade is cheap in 5/4.5, 5.5/5 and 6/5.5. LOAS results from Yield Book also show the richness of the lower coupons as they have tighter spreads and worse convexity.

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