Mortgages saw sizeable volumes last week as the market rallied, flows were two-way and buying was better overall. Servicers remained active, but were now selling 6s to move down in coupon. Originator selling also picked up in the early part of the week, averaging around $1.5 billion per day, mostly in 6% coupons. Towards the week's end, selling had slowed and was concentrated more in 5.5s.

Last week, RBS Greenwich Capital MBS analysts noted an improved tone in mortgages with the 10-year Treasury back towards the middle of its two-month range - 4.30% to 4.67%. As a result, RBS Greenwich analysts believe the sector's risk profile has shifted back towards neutral. However, they expect that, with the market having traded around current yield levels for a while, investors' appetites are probably satisfied for now.

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