Agency MBS Speeds Decline

Prepayment rates on 30-year fixed-rate mortgages in agency mortgage-backed securities fell 14% in July, according to Bear, Stearns & Co.The decline reflected a two-day reduction in the business calendar and a 6-basis-point selloff in mortgage rates, said Bear Stearns senior managing directors Dale Westhoff and V.S. Srinivasan. Fannie Mae 30-year collateral recorded a constant prepayment rate of 10.7 CPR overall for the month, down 1.7 CPR from that of June, the analysts reported. "The decline in speeds was uniformly distributed across the coupon stack, with almost every coupon showing a 14% to 15% decline," they said. Speeds on 15-year Fannie Mae and Freddie Mac collateral fell by 13%, comparable to the decline in 30-year speeds. Overall speeds on Ginnie Mae collateral fell from 16.2 CPR in June to 14.4 CPR in May. Despite the recent rise in mortgage rates, the analysts said they expect speeds to increase 10% in August, mainly because of a three-day increase in the business calendar. But in the longer term, "we expect a steady decline in speeds," they said. Bear Stearns can be found online at http://www.bearstearns.com.