It wasn't a pretty week in mortgages, to say the least. Last Thursday got off to a bad start with the release of Freddie Mac prepayments which came in faster than was generally expected for the 2000 vintage premiums.
Mortgage players reacted with heavy buying in 10s. Then the sellers emerged with more than $1 billion coming from originators in 6s and 6.5s, and some modest-sized bid lists from banks. This was topped off by news that the recently merged FleetBoston/Summit banks, which have been a heavy seller of MBS lately, was bringing $7 billion in CMOs and $1 billion in AAA CMBS (see story, p.1).
Near close last Thursday, 30s were underperforming by 1.7 ticks and 15s were off 1.3 ticks. Spreads moved out substantially, particularly in the discount sector, where a good portion of Thursday's supply came. Conventional 30-year 6s through 7.5s were out about three basis points while 8s and higher were weaker by one basis point. Fifteens were wider by three to four basis points. Swaps were tighter by three basis points, though agencies widened in line with MBS.