Volume was below 50% the normal amount in the last week of 2007. Many market participants were out for extended vacations and Wall Street desks were thinly staffed. The flows taking place were mixed and reactive to moves in Treasury rates. The days after Christmas saw some buying interest from overseas investors and money managers that helped hold spreads tighter with a modest amount of month-end buying thrown into the mix. Originator selling averaged about $1.5 billion per day.
Mortgages closed 2007 significantly lagging Treasurys as a result of the housing crisis, although performing substantially better than competing sectors. Lehman Brothers said that excess return versus Treasurys on the MBS Index was negative 187 basis points, negative 445 basis points for CMBS, negative 456 basis points for U.S. Credit and negative 629 basis points in ABS.