The mortgage story is once again about technicals. Last week was characterized by limited originator selling - approximately $1 billion per day - and increasing buying support. In particular, there is a returning CMO bid. Money managers were also better buyers, and there was even the beginning of some index buying as the end of the month approaches. Over the Wednesday-to-Wednesday period, spreads on 30-year Fannie Mae 5s and 5.5s were one basis point tighter, while 6s and 6.5s were three basis points firmer. Dwarf 4.5s through 5.5s were in two to three basis points over the period.

Last week also saw increasing interest in the Ginnie Mae sector as a result of the GSE headline risk. Spreads were three to four basis points tighter in 30-year 5s through 6s, and six basis points firmer in 6.5s.

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