MBS continue to see mostly below-normal volume as a result of the ongoing deterioration in housing, subprime and funding. Many market players also remained out on late summer vacations, which contributed to the limited activity.

Flows last week were mixed, though surprisingly, some widespread buying interest showed up at midweek - apparently related to news that the European Central Bank (ECB) could add more liquidity to its markets later in the week if conditions remain poor. Interest was along the coupon stack, though the preference was mostly up in coupon.

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