Last week saw reversal from the heavy originator selling and profit-taking that was seen in the previous week.
The widening in spreads encouraged investors, especially money managers, to begin adding positions again. At the same time, originator selling was relatively light at $1 billion or less per day. As a result of the better buying, spreads moved in noticeably over the week. From Wednesday, Jan. 16, to Wednesday, Jan. 23, spreads on 30-year Fannie Mae 6% through 7% coupons tightened seven to nine basis points; and 7.5s and 8s were 12 and 16 basis points firmer, respectively. Fifteen-year MBS moved in six to seven basis points as investors took notice of the sector's lagging versus 30-year MBS on recent heavy supply.