Volatility increased as the market sold off ahead of late week's data that included PPI and CPI. This triggered better selling in mortgages, particularly in Fannie Mae 5s, where traders reported the sale of a very large position by a bank portfolio. This led to additional selling and when all was said and done, between $6 billion and $9 billion in FNMA 5s hit the Street between Tuesday and Wednesday, JPMorgan Securities confirmed.

The selloff also brought backup in coupon trading and preference for 15s versus 30s. Servicers were reported to be strong sellers as well. Originator selling was limited and held to around $1 billion per day on average, mostly in 5.5s. Lehman Brothers noted that originators are short duration currently and have been holding onto new production - hence, the lack of supply in recent weeks.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.