Mortgages saw active two-way flows last week with strong selling early on, followed by active buying by mid-week on the cheapening and by month-end. On Tuesday, relative value accounts unloaded more than $4 billion, mostly in Fannie Mae 5.5s. Servicers were also active sellers, primarily in 5s and 5.5s. Even originators got into the act, selling about $2 billion that day in 5.5s and 6s. Substantial widening drew in better buying on Wednesday, which continued into Thursday and Friday's sessions. Support came from dealers, banks, money managers and hedge funds with preference in 30-year 5s through 6s, and higher coupon 15s.

Over the Thursday-through-Wednesday period, spreads were flat in 30-year Fannie Mae 4.5s and 5.5s; two basis points wider in 5s; plus three basis points in 6s; and one basis point weaker in 6.5s. In 15s, spreads moved out one basis point in 4s and 4.5s, and were one basis point tighter in 5s and 5.5s.

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