If supply has been a story over the past several sessions, the topic turned to demand last week. In fact, the buying support pushed week-over-week spreads in 12 to13 basis points in 30-year Fannie Mae 5.5%, 6.5% and 7.0% coupons. Meanwhile, 6s moved in only five basis points after putting in a strong performance the previous week. Dwarfs also did well, averaging 15 basis points tighter for 5% through 6.5% coupons.
Over the week, mortgage bankers brought about $7 billion to $8 billion, roughly half of which was sold during the week of Nov. 11. Most of the supply was in 30-year 5.5s. Hedge funds, money managers, banks and servicers scooped up the volume as well as the overhang from the previous week. Before the trend turned, traders had suggested that their long situation created from the heavy supply was reversing and that desks were becoming short.