Despite concerns regarding convexity and prepayment risk, the mortgage sector began to see good buying by Thursday of last week. The sector is seen as cheap on a fixed-volume basis by some, and the primary participants have been money managers, banks, CMO dealers and arb accounts, sources say.

While originator selling was somewhat modest towards the end of the week, over the near term it is expected to remain heavy due to the low level of mortgage rates.

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