Mortgage valuations remain rich as supply continues to be limited and demand holds strong. Last week, originator supply averaged about $1 billion per day. At the same time, banks were very active buyers along with insurance companies. Other investors, however, were fairly quiet.

RBS Greenwich Capital says banks are supportive as the absolute yield levels are too attractive to ignore, and because the power of a 1% Fed Funds rate makes entry points less relevant. Analysts at Greenwich also do not think that there will be a change in valuations anytime soon due to limited originator selling. JPMorgan Securities concurs, saying that mortgages should continue to perform well given the lack of supply, increasing carry, along with a modest rise in bank and insurance company demand.

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