Mortgages saw improved funding and strengthening dollar rolls at the beginning of last week. This was because the world government programs were starting to get a foothold. U.S. one-month Libor dropped nearly 90 basis points over the previous week, and mortgages rallied sharply on Monday. Real money, hedge funds and servicers actively bought down-in-coupon.
Contributing to the down-in-coupon move was a strong rally in Treasurys on the poor economic outlook from the recent data as well as from Federal Reserve Chairman Ben Bernanke's testimony to the House Budget Committee on that day.