When is the Federal Reserve's hand going to be forced on inflation? That was the question that was fueling early week action in the markets last week. On Monday, the tone was the Fed would be increasing rates rather soon. However, an article on Tuesday in The Wall Street Journal said maybe it will not be so soon. The resulting action in Treasurys was a sell-off on Monday with the curve holding flatter, then rallying on Tuesday and Wednesday with the curve steepening.

Mortgage flows were running just below normal through the first half of the week. Monday experienced better selling, particularly from leveraged accounts and servicers - both outright and to move up in coupon. Overseas investor buying picked up on Monday evening and into Tuesday and Wednesday as Treasurys rallied, along with real money, all focused throughout the 30-year stack and in higher coupon 15s.

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