MBS activity last week was more active than many thought it would be given the upcoming FOMC meeting, Iraqi hand-off, and the June employment report. The week saw modest two-way flows influenced by the yield curve and volatility. In general, the sector saw a better bid on steepening and lower vol, and better selling on flattening and higher vol. Originator selling held to its recent $1 billion daily average.

Over the week, spreads were two basis points tighter on 30-year Fannie Mae 4.5s; flat in 5s and 6.5s; and one and two basis points wider, respectively, in 5.5s and 6s. Meanwhile, 15s lagged 30s with spreads two basis points weaker in 4s and 4.5s; one basis point wider in 5s, and unchanged in 5.5s.

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