Despite sporadic investor interest, mortgage flows dried up last Thursday afternoon with Treasurys pulling firmly ahead of MBS for the first time in about a week.

Both 15s and 30s shared in the sector underperformance, with the lower coupons getting particularly hit. In 30s, 6s and 6.5s trailed Treasury hedges by 9/32 and 4.5/32, respectively, while in 15s, 6s and 6.5s were 5.5/32 and 4/32, respectively, lower. In the main, mortgages performed as expected, finally cheapening up since going gangbusters following the previous week's rate cut.

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