The mortgage market enjoyed active two-way flows last week. It was a quiet start ahead of appearances on Tuesday and Wednesday by Federal Reserve Chairman Alan Greenspan. In his testimony on Tuesday before the Senate Banking Committee regarding the banking industry, Greenspan spooked the market by commenting that the banking industry was prepared for higher interest rates. The market sold off in response to this late Tuesday.

Then, late morning Wednesday, the market started to rebound when Chairman Greenspan spoke before the Joint Economic Committee on the state of the economy, saying "as yet, the protracted period of monetary accommodation has not fostered an environment in which broad-based inflation pressures appear to be building." The more positive tone encouraged investors to take advantage of recent widening, particularly in the lower coupons.

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