Last week got off to a slow start as investors remained nervous about the credit markets, but it ended on Wednesday with the favorable core CPI news, the Fannie Mae Mega report for May, and an improved tone in credit derivatives. Treasurys rallied and real and fast money were strong buyers - particularly in 5s and 5.5s - which was carrying over into Thursday morning.

The Fannie Mae Mega report for May stimulated heavy buying in FNMA 5s. The GSE reported that $26 billion in FNMA 5 Mega pools were created in May and follows on a total of $24 billion created in March and April versus total production of just over $22 billion so far this year, according to reports.

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