Mortgages experienced heavy two-way flows last week. Supply held steady at about $8 billion, similar to the previous week's levels. However, about a third of the supply consisted of 15-year MBS. Money managers, arb accounts, banks, and CMO desks remained strong buyers of the sector, especially in 30-years. In fact, demand more than matched supply.

The previous week's richening in higher coupons was reversed this week, with investors taking profits and moving down in coupon. Interest in the 15-year sector remained mixed despite many factors in its favor, and with the larger supply this week, the sector lagged. Spreads widened about five to seven basis points on the supply and Treasury rally.

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