As the 10-year Treasury sold off sharply following President George W. Bush's nomination of Ben Bernanke as the new Federal Reserve chairman to replace Alan Greenspan, the bond markets reacted negatively to the uncertainty of how Bernanke may deal with inflation. Mortgages were hit by heavy servicer selling, totaling in the several billions of dollars and primarily in 30-year 5s and 5.5s.
Other investors were also better sellers. However, both real and fast money began to take advantage of the cheapening Wednesday afternoon and it was carrying over into Thursday's session as Treasurys held a more supportive tone. Also expected late week and into Monday is some month-end index buying. The MBS Index is estimated to extend 0.10 years, according to Lehman Brothers.