After strong buying over the first three days following the Federal Reserve's announcement that it had started to buy agency MBS, flows turned more balanced. The average price of the MBS market stands at just under a $104 handle and is up against increased resistance as rates rally further.

A sharp flight-to-quality rally in the first half of the week led the 10-year Treasury higher by two points through midday Wednesday, bringing the yield to 2.19%, while FNMA 4.5% prices were down 10 ticks. While the Fed continued to buy an estimated more than $3 billion per day on average, money managers, pension funds and banks more often took profits.

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