Mortgages experienced aggressive buying following the on-target employment report that continued into Wednesday's trading session. Mortgage performance was also helped by a decline in volatility as interest rates rose. Over the Thursday-through-Wednesday period, mortgage spreads were one basis point wider in 30-year Fannie Mae 4.5s and 5s; one basis point tighter in 5.5s; and four to five basis points better in 6s and 6.5s. In 15s, spreads were flat to one basis point firmer in 4s through 5s, and in three basis points for 5.5s.
While mortgages performed well last week, most coupons are expected to continue doing well over the short term, due to limited supply and attractive carry.