The rally from the government's rescue plan to buy troubled assets did not carry over into last week's trading. As the markets opened Monday, uncertainty regarding details of the plan as well as its impact on inflation and the economy replaced the initial euphoria. The dollar sank and crude oil jumped $16 to just under $121 a barrel, causing equities to tumble 373 points and the 10-year Treasury to fall 15+/32nds on the prospect of higher supply.

Mortgages were impacted as well by the unwinding of Lehman Brothers' counterparty exposure. This led to better selling by real money and others, particularly in 6% coupons. In below-normal volume, MBS spreads ended near their widest levels of the day with 5s wider to the curve by 18 ticks, 10 on 5.5s, seven on 6s and five on 6.5s. Versus swaps, spreads ranged from 14 ticks weaker in 5s to three in 6.5s.

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