Last week's mortgage activity was mixed. Originator supply averaged $1.5 billion, less than the $3 billion per day that was expected. At the same time, episodes of widening - from supply or the FOMC surprise - attracted a variety of buyers. Traders noted support coming from banks, money managers, CMO dealers, servicers and arb accounts. Banks were focused in 30-year 5.5s and 6s, as well as 15-year 4.5s and 5s, while money managers continued moving up-in-coupon as a result of carry. There was also some month-end extension buying seen early in the week. Most of that activity, however, was expected to show up last Friday.

Duration extensions for January are fairly minimal for mortgages as prepayments slowed. Lehman Brothers expects the MBS Index to extend 0.10 years. The Agency Index is also forecast to extend 0.10 years. Meanwhile, the Treasury Index is estimated to show no extension for the second month in a row, while the U.S. Credit Index increased 0.06 years. Overall, the Aggregate Index is set to

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