As discussed a couple of weeks back (see post), the primary dealers had built up quite a position in MBS (mostly agency paper) - in what started to look like a crowded trade. Some of those positions have been reduced in recent days, causing long-dated agency paper to sell off somewhat (following treasuries lower).
|30y 3% coupon FNMA bonds (price) (source: MortgageNewsDaily.com)|
As a result, the 30y mortgage rates have bottomed - for now.
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