Poor liquidity continued to be quite noticeable in last week's mortgage-backed securities market, sources said, but mortgage bonds proved to perform fairly well versus other spread product, such as corporate and agency paper.

"However, mortgages did not do so well versus Treasurys on the week," said David Montano, a director of mortgage research at Credit Suisse First Boston. "But spreads versus swaps have tightened a little bit, perhaps two or three basis points."

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