CS Prepay Outlook Mixed Due to Rates, HARP

A Credit Suisse prepayment forecast suggests the slowdown in lower coupons last month will continue in March based on rate activity to date, but it also calls for somewhat of a pickup in other coupons due to the Home Affordable Refinance Program.

“We project roughly flat 30-year and 15-year speeds for March based on the impact of roughly 10 basis points higher mortgage rates being offset by higher day-count and stronger seasonals,” the firm’s researchers said in a report.

“Across the coupon stack, rate-sensitive coupons, led by 30-year 3.5s, should continue to slow down.”

However, the report also projects that there will be modest increases in “HARP-eligible cohorts…due to higher day-count.”