Last week was a relatively quiet week, volumewise, in the mortgage market as many participants took vacations during the Presidents Day holiday week. Flows were mixed with Tuesday recording better selling as the 10-year yield held below 4.70%. On Wednesday, supportive flows emerged on the stronger-than-expected CPI report that pushed the 10-year yield back above 4.70%. Buying on a ratio of 3 to 1 was reported from money managers and servicers - focused in discounts - while other real money, relative value accounts and dealers were reportedly interested in par and premium coupons.

Treasurys continued to weaken on Thursday with the yield on the 10-year Treasury at 4.724% at midday. This was encouraging widespread buying interest, with buying all over the coupon stack. Overseas buying last week was a pleasant surprise for the markets - being better than expected given that China was in the midst of its New Year's celebrations. Lately, foreign investor buying has been mostly in 5.5%s and 6%s. Originator selling was above average at between $1.5 billion and $2 billion per day. The supply, however, was readily absorbed with the better buying seen midweek.

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