Early-week volume into Wednesday was modestly below normal. This was because the Chinese New Year celebrations kept overseas investors quiet and the market waited for the Federal Open Market Committee's (FOMC) Wednesday statement.

Flows were two-way among money managers, hedge funds and banks, and ranged all over the coupon stack. Meanwhile, the Federal Reserve was a steady presence and focused primarily in the lower part of the coupon stack. Supply remained uneventful, averaging about $1.75 billion per day into midweek, which contributed to the outperformance in the down-in-coupon trade. Dollar rolls strengthened, GNMA/FNMAs were flat to lower and 15s underperformed 30s.

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