Before the Asian markets opened last Monday, it was announced that JPMorgan will be buying Bear Stearns for $2 per share. The Federal Reserve was also expected to cut the discount rates once again and to implement a new lending facility for the large investment banks to secure short-term loans.
The news served as a balm for MBS investors, resulting in the MBS sector tightening steadily throughout last Monday's session. The day saw very limited selling, with originators bringing less than $1 billion in supply, which was spread between 4.5s through 5.5s. There was active buying from servicers, hedge funds, money managers and Asian investors, both outright and versus Treasurys and swaps, while banks were two-way.