Last week's mortgage activity saw increased profit-taking following the previous week's strong tightening. Originator selling remained light with the exception of Wednesday's session that saw $3 billion. In addition, the sector was impacted by a flight-to-quality into Treasurys on terrorism attack concerns. As a result of the flight-to-quality, further supported by short covering, and rate lock unwinds, Treasury yields were back near their lows of earlier this month. In fact, the 10-year yield, as of mid-day Thursday, was down to 5.06%, off 23 basis points from a week earlier.
On the combination, mortgage spreads weakened. From Friday, May 17's close through Wednesday, spreads moved out three to four basis points in conventional 30-year currents and five to six basis points in 7% and 7.5% coupons. The 15-year sector recorded similar spread widening.