Flows were modest last week in mixed flows. Ahead of the Federal Open Market Committee statement last Wednesday, mortgages saw better selling, particularly on Tuesday, as the market slipped through 4.75% on the 10-year Treasury due to the PPI-inspired rally and flight-to-quality bid from a military coup in Thailand.

Participation was widespread with buying and selling reported from money managers, banks, servicers and other fast money, although Asian investors stayed by the sidelines hoping for cheaper prices. Following the uneventful FOMC statement on Wednesday and continuing into Thursday's morning session, mortgages were benefiting from the drop in volatility, tightening in swap spreads, as well as a pickup in buying. With the outlook for the market to hold in a narrow range for the near term, investors appear to be putting some of their money to work in mortgages. This includes Asian buysiders, who faced limited attractive alternatives.

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