As last week opened, the market was feeling pretty good as the weaker-than-expected jobs report increased the odds that the Federal Reserve would pause in June. On top of that, the week saw limited key data to roil the markets, and support potential from reinvestment of paydowns and roll related trading. But the market got its hopes quickly deflated following comments from Fed Chairman Ben Bernanke Monday afternoon at an international monetary conference. His hawkish tone moved the odds for another rate hike in June.

Over the week, flows were mostly two-way with broad domestic participation. The early week saw moves up-in-coupon - despite the curve flattening - as investors took advantage of recent cheapening in the higher coupons on the previous week's strong down in coupon trade. Midweek, there was some reversal of the move up, with decent buying again in lower coupons. Activity slowed into Thursday's trading session as global equity distress returned to the forefront. In general, investors are more or less trading the market right now - adding on weakness and selling on strength - given the risks. Meanwhile, originator selling held to average levels last week. Supply is currently split between 5.5s, 6s and 6.5s.

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