Agency prepayment speeds came in line with expectations in the 30-year sector, where they were up 3% from the previous month, according to Credit Suisse's fixed income research report Wednesday.
The report also indicated some relatively lower 15-year coupons, particularly 2010 vintage 3.5s and 2011 vintage 4s, slowed more than expected.
“We think this is probably a timing issue where the slowdown in the lowest coupons reflects relatively flat 15-year mortgage rates in the past month or two,” said Mahesh Swaminathan, managing director, residential mortgage-backed securities research, at Credit Suisse. “As a result these low coupon borrowers most likely got processed more quickly through the pipeline.”
Earlier data showed the lower coupons in the 15-year sector “had a big spike when rates first rallied in the month of September" and relatively higher coupons in the 15-year sector increased slightly in the latest month's data, in contrast to the slowing in the lower coupons. This suggests, “Lenders tend to get the borrowers whose incentives are most marginal through the pipeline first,” he said in an interview with this publication.
