The MBS market saw active two-way flows last week, with originator selling picking up from recent daily averages of $1 billion to between $1.5 billion and $2.0 billion. The increase was easily absorbed by strong demand from money managers, hedge funds, and CMO desks. Buying interest was somewhat more diverse last week. As lower coupons become increasingly pricey, moves up in coupon were observed, as well as moves into 15-year paper.
Over the Wednesday-to-Wednesday period, spreads on 30-year Fannie Mae 6s moved in three basis points, 6.5s were just one basis point wider, and 7.5s and 8s were one basis point firmer and flat, respectively. In dwarfs, spreads were unchanged in 5.5s, 6.5s and 7.5s, and four to five basis points tighter in 6s and 7s.