Lehman Brothers analysts in a recent report said although overseas demand has been robust, it is not enough to absorb any potential shortfall in GSE or bank MBS demand.

Lehman added that with the yield curve expected to flatten or even invert this year, the demand for mortgages from private institutions should wane, though this should be somewhat offset by increased demand from central banks as they continue to ramp up the proportion of their dollar MBS assets.

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