The lack of economic data last week as well as the upcoming Federal Open Market Committee meeting kept volume on the lighter side. The most active participants were fast money and servicers, who were generally selling lower coupons to move up. Originator selling, meanwhile, was close to average on the week with supply focused in 6s and 6.5s. Although the supply was uneventful, it was weighing on the market with many buyers sidelined.
Finally, the higher yields did start to draw in some Asian investor buying. Although it was light, the market was encouraged by their appearance. Meaningful support from this group, however, is not expected until there is more clarity regarding future Federal Reserve action. Additionally, there is concern that the Bank of Japan's plan to move from its zero interest rate policy would strengthen the Yen, and would further derail Asian MBS buying, RBS Greenwich Capital analysts said last week.