Prepayment rates for agency mortgage-backed securities were generally flat for 5.0% and 5.5% coupons but increased as much as 12% for higher coupons in the August reporting period, according to Bear Stearns.Bear Stearns analyst Dale Westhoff attributed the strength of the numbers to the three additional business days in August, which he said "clearly offset" the rise in mortgage rates that took place during the period. Discount prepayment rates maintained a record pace in August, he reported, noting that the speed of the huge 2003 vintage 5.0% coupon rose from a constant prepayment rate of 18.4 CPR in July to 19.1 CPR. "This pace continues to be over 50% faster than historical averages and reflects rising home prices and vigorous cash-out refinancing activity," Mr. Westhoff said. "It is important to note that so far the massive flattening in the yield curve has had little impact on discount/current coupon MBS prepayments." The Bear Stearns analyst said speeds are likely to slow significantly in September. Bear Stearns can be found online at http://www.bearstearns.com.

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