Mortgages have done well as the market has steadily strengthened with the 10-year Treasury yield trying to move below 4.50%. Despite the levels, last week saw above average volume with better buying overall. Real money, fast money and particularly servicers were very active with interest primarily focused in the 5.5% and 6.0% coupons.

Based on trader talk, about $5 billion traded in these coupons between Tuesday and Wednesday. The 5% coupons were also seeing support from some investors seeking duration. Asian buying also remained a modest participant in the overnight markets. In general, investors tended to move towards the sidelines with some profit-taking in the few times that the 10-year yield breached 4.50%. However, these buyers returned to take advantage of the cheapening when yields backed up above 4.50%. Originator selling was up last week, averaging about $1.5 billion per day. Supply has been primarily in 5.5% and 6.0% coupons.

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