Last week saw some reversal in recent mortgage market activity. Originators, which had been selling per day amounts of about $2 billion in the previous week, averaged around $750 million. The selling dried up as rates rallied over 30 basis points throughout the week on increased expectations that the Fed would cut rates before yearend.

Investor flows were mixed with profit taking noted from money managers and hedge funds. There was modest buying, focused primarily in current coupons of both 30- and 15-year MBS. Spreads over the Wednesday-to-Wednesday period were two basis points wider in 30-year Fannie Mae 6% coupons, and nine and 17 basis points, respectively, in 6.5s and 7s. Dwarfs were two basis points wider in 5.5s, plus seven basis points in 6s, and plus 19 basis points in 6.5s.

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