In CMO land, analysts anticipate that although originations in the sector will dip in 2005, it would remain robust relative to the issuance in the mortgage market as a whole, which is expected to decline significantly.

"The spread that CMOs currently offer are still attractive even with a flatter curve," said Victoria Averbukh, an MBS analyst from Deutsche Bank Securities. Averbukh added that CMOs offer a wide range of short-duration products that appeal to many investors in a bearish interest-rate market.

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