The final quarter of 2011 got underway with the return of the Fed which began reinvesting its paydowns from Agency MBS and debentures back into the MBS sector. 

Investors were anticipating strong supply-demand dynamics to be evident immediately; however, that wasn't the case.  In fact, beginning October 3 through October 5, the Fed bought $3.95 billion in 3.5% and 4.0% coupons, while mortgage banker supply totaled nearly $7 billion.

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