Mortgages took a good old fashioned, bat-to-the-kneecap beating last week, making this the worst month for the sector in over ten years, bank researchers said. While investors were selling to ward off duration - or, at the very least, stayed on the sidelines - supply was robust.

The numbers pretty much say it all. Over the Wednesday-to-Wednesday period, spreads on 30-year Fannie Mae 5s through 6s widened 25 to 29 basis points. Meanwhile, 15s did slightly better with 4.5s and 5.5s 13 basis points weaker, and 5s out 19 basis points. Lehman Brothers reports that through July 30, the MBS Index has under-performed Treasuries by 101 basis points for the month. This is the worst showing in more than a decade, according to Lehman.

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