Mortgage flows were mixed last week as the news featured a Federal Open Market Committee meeting, the Treasury Quarterly Refunding announcement and January non-farm payrolls.

Volume was light at the start of the week as participants waited for the FOMC's statement. Committee members voted to drop the term "measured," but with the potential inflation risks they said, "some further policy firming may be needed." Strong selling followed with both real and fast money dumping 5.5s and 6s to move down in coupon as the curve flattened. Specifically, 6s were hit by strong selling on Tuesday, totaling over $3 billion. A servicer apparently made a large purchase of FNMA 5s from 6s. There is some divergence in opinion, however, on whether it occurred before the FOMC news or after.

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