Prepayment rates on 30-year, fixed-rate, agency mortgage-backed securities dropped 20% in September as a result of higher mortgage rates, fewer business days, and the beginning of the fall slowdown in housing turnover, according to Bear Stearns.The largest percentage speed declines came in the lower coupons, where 4.5s, 5.0s, and 5.5s fell 20%-25%, compared with 10%-12% declines on 6.5s and higher coupons, according to Steven M. Bergantino, managing director of mortgage research. However, discount speeds were still "well above historical norms," he said, citing the example of fully seasoned 5% coupons that prepaid at 15 CPR, versus a historical level of 9 CPR. "Moreover, these elevated discount speeds have persisted in the face of a pronounced flattening in the mortgage yield curve, providing a strong indication of the continued influence of cash-out refinancings on fixed-rate prepayments," the analyst said. Average speeds on 30-year Fannie Maes stood at 19.4 CPR overall in September, down 4.5 CPR from their August level, compared with 17.5 CPR (down 4.7 CPR) for Freddie Macs and 25.2 CPR (down 4.4 CPR) for Ginnie Maes. Bear Stearns can be found online at http://www.bearstearns.com.

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