Volume in the first half of last week was running about average in MBS in two-way flows. In general, hedge funds continued to de-leverage and were actively selling in 5s and 5.5s.

Overseas buyers, money managers and real money investors took advantage of widening spreads on any given day. Spreads on Tuesday moved out to historic wides. As this was occurring, many investors were buying. However, as spreads continued to deteriorate, most investors threw in the towel and sold. Servicers were also heavy sellers on Tuesday at over $3 billion, primarily in 5% and 5.5% coupons.

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