The tone in the first half of the week was decidedly more supportive for MBS compared to the previous week. Despite a further sell-off in Treasurys, convexity selling was limited. With spreads at historical wides, many investors became opportunistic buyers.

Monday saw range-bound conditions in most markets, including equities that set mortgages up for their first up-day in five straight trading sessions. Money managers, hedge funds and, to a smaller extent, Asian investors were better buyers and were focused in 5s through 6s, both outright and versus Treasurys and swaps. Flows were down in coupon, although servicers were partially offsetting moving up in coupon.

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