Steady, but light two-way flows characterized last week's mortgage market. Mortgage banker selling averaged less than $1 billion per day. In addition, modest selling was seen by servicers and hedge funds. All of the selling was focused primarily in 5.5s. Buyers were wide-ranging and were interested primarily in the lower coupons and 6.5s. In addition, indexers were expected to be active on Thursday and Friday. According to Lehman Brothers, the MBS Index is expected to rise 0.16 years on June 1 due primarily to paydowns.

Over the past week, spreads leaked out one basis point on 30-year Fannie Mae 4.5s through 5.5s, and three to four basis points for 6s and 6.5s. Meanwhile, 15s lagged 30s with spreads widening three to five basis points.

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