Mortgages have not done well thus far in the holiday-shortened week.  Volume was below normal with better selling,  especially from servicers.  They were selling lower coupons to move up in coupon to shed duration as Treasurys continued to sell-off. The 10-year Treasury yield backed up above 4%, up 60 basis points from the Oct. 6 close when the 10-year was at 3.426% as global fears surged as overseas government began arranging bailouts and guaranteeing deposits.

Other investors were actively selling as well, including money managers and hedge funds in 5s through 6s, while overseas were selling in both 30- and 15-year current coupons to move into GNMAs. Banks, however, took advantage of the widening to add in 5.5s and 6s. Meanwhile, supply was light at less than $1 billion per day.

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