Last week's highlight was the government's takeover of Fannie Mae and Freddie Mac. Since the announcement was made on Sept. 7, a Sunday, it led to a sharply higher open in MBS last Monday.

It was a record-setting day in terms of price and spread gains. MBS prices surged 85 ticks on FNMA 5s, making that coupon the new current, 65 ticks on 5.5s, 41 ticks on 6s and 29 ticks on 6.5s. In Dwarfs, 4.5s soared 58/32nds, 5s 45/32nds, 5.5s 26/32nds and 6s 14/32nds. By the 3:00 marks, spreads were tighter to the curve by 88 ticks, 5.5s 66 ticks, 6s 41 ticks and 6.5s by 28 ticks. Relative to swaps, spreads ranged from 73 ticks firmer in 5s to 21 ticks better in 6.5s.

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