Mortgage activity last week was modest, two-ways and mostly up-in-coupon. Real money, including overseas and fast money, were primarily buyers of 5.5s. Meanwhile, 6s also saw good support from certain bank buyers. Originator selling fell back to around its $1 billion average daily level; however, supply turned more balanced between 5s and 5.5s.

The FNMA 5 roll dropped to carry last week during settlement and is looking to be an old story for now. In their mid-week comments, JPMorgan Securities analysts said they expect FNMA 5 supply to exceed $45 billion in the July through September period. Given the heavy supply, they don't expect any improvement in the roll over the near term.

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