Spreads have remained unchanged with a bias toward the tighter end as market observers await economic reports to indicate if the Federal Reserve will raise shirt-term interest rates later this month. In the mean time, all focus has shifted toward Ginnie Mae, as it contemplates changing its Program I securities to be more competitive with the Federal Home Loan Banks.

In light of this news Ginnie Mae Program II securities have been trading extremely cheap, said a mortgage-backed securities trader. "I think the short term effect is that they're very cheap because there will be no supply," he said. "Long term, I think the whole market's going to die and there'll be no liquidity."

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