Torn between 5s and 5.5s as both offer just about the same amount of carry on a hedge adjusted basis. The 5.5 roll needs to move higher between now (06/04) and next Tuesday (06/10) as the stratification of every favorable loan type created too big a short in TBAs. Pay-ups for the various specified pool types exploded in the past month and seeming to price most retail investors out of the market. CMO and derivative deal execution seem the best bids for this paper in more current coupons. GNMAs aren’t breaking down vs. conventionals. But if the FNMA 5.5 roll the GNMA/FNMA 5.5 should collapse and carry the entire GNMA sector lower.

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