Performance gains in December have been mediocre, with Lehman Brothers' MBS Index up just four basis points month to date. In recent sessions, stronger than expected data (nonfarm payrolls and retail sales) have been steadily moving yields mostly higher with one foray lower on Federal Open Market Committee day. Following the weekly claims data on Thursday morning, the 10-year yield was at 4.60% after trading below 4.50% from the end of November until the employment report.

Mortgage flows over the week were fairly active and two-way. Ahead of Tuesday's FOMC meeting, mortgage volume was relatively quiet. Flows picked up modestly following their afternoon statement on Tuesday with better buying as the market rallied.

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