Last week's flows were fairly balanced as the market continued to respond favorably to the benefits of a Fed on hold. Profit-taking was observed by money managers, particularly in 15-year MBS, and arb accounts, but were balanced out by buying in lower-coupon 30-years.

Banks, insurance companies, and CMO dealers were also noted buyers, with interest in the discount sector as prices rose and prepayment risk increased. Originator selling was nearly non-existent with supply limited to about $500 million per day. This, however, is expected to increase in the weeks ahead. All in all, spreads moved several basis points tighter over the Wednesday-to-Wednesday period in both 15s and 30s.

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