The mantra in mortgages lately has been "directional with rates." And indeed, the market has tended to lag on rallies and lead on sell-offs. So this is how it was last week with relatively quiet trading early on as the 10-year hovered and broke through 4%. Strong buying emerged on Wednesday from hedge funds and insurance companies as Treasurys sold off on declining oil prices, which also led to a rally in equities. This continued into Thursday morning with additional support from servicers and foreign banks, but was reversing midday when Treasurys rallied on a stall in oil prices. This move weakened equities as well as buying in Treasurys on corporate hedge unwinds.

Overall, spreads held in a fairly narrow range over the week ending Oct. 27. Meanwhile, 30-year FNMA 4.5s through 5.5s were flat to one basis point wider; 6s and 6.5s were one and four basis points tighter, respectively. Also, 15s were one to two basis points tighter as investors preferred that sector as the 10-year broke through 4%.

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