Speeds Slow for Agency MBS Below 6.5%

Prepayment rates for agency mortgage-backed securities fell across the board among coupons below the 6.5% level and held steady or rose modestly among higher coupons in the August reporting period, according to the Bear Stearns Prepayment Commentary.Analysts Dale Westhoff and Bruce Kramer said percentage declines in constant prepayment rates ranged from 25% to 35% for new cohorts of 5.0% and 5.5% coupons for both conventional MBS and Ginnie Maes. While acknowledging a few surprises among super-premiums in the report, the analysts said "all signs point toward a sharp slowdown across all coupons and vintages in the September reporting period." Speeds of Freddie Mac MBS were once again consistently faster than those of comparable Fannie Maes, but the gap had narrowed and should close by the end of the year, the analysts predicted. Bear Stearns can be found online at http://www.bearstearns.com.