Over the pas few weeks the FNMA 5.5 butterfly in April has moved from around 29/32nds to 10/32nds last night (04/08). With this in mind , will stick with this issue for several reasons. First, 5s are a 1 to 2 month phenomenon at most. Once the bank buying abates and the forward month supply pulls through, the rolls will cool off. Also, the convexity profile of this coupon is worse than the theoretical models suggest. If the market makes new lows in yield,5s will become the exclusive production issue. If the market pierces the bottom end of the trading range, extension takes over and 5s are just long and spreadless.

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