Since the February employment report, the yield on the 10-year has fallen 30 basis points. For the mortgage market, this has dramatically increased prepayment and convexity fears - and investors responded accordingly last week by moving down in coupon. Particularly hard hit were 30-year 6s. In addition, the decline in rates has led to increased selling from originators to a daily average of $2 billion last week, up from recent averages of $1 billion.

Over the past week, option adjusted spreads on 30-year Fannie Maes were unchanged in 4.5s; one basis point wider in 5s; and plus three and four basis points, respectively, for 5.5s and 6s. Meanwhile, 15s lagged 30s with spreads moving out six basis points in 4s; eight basis points in 4.5s; and nine basis points for 5s.

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