After two weeks of active buying, selling picked up and flows turned two-way as the curve flattened and periodically inverted. With most investor types participating - including servicers - activity moved up and down the coupon stack depending on the curve action. Mortgages held within a narrow range, however, helped by the favorable technicals. Originator selling continues to average less than $1 billion per day.

The near-term outlook suggests that mortgages are likely to struggle on further rallies as the strength encourages profit taking. There is also the concern that bank selling will pick up if 5% coupons hit $98. Support from overseas is also seen as sidelined as investors wait for yields to move higher.

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