The April prepayment reports on conventionals, which were released May 4, showed last month's prepay speeds were in line with earlier Street expectations. Conventional prepayments were up just slightly for most coupons and vintages. This could be attributed to the two-day decline in day count being offset by stronger seasonals as well as increased refinancing activity in March.

However, it was noteworthy that there were increases for 2006 vintages. The explanation for this might be that mortgage rates were much higher when these loans were originated than they are now at current levels. There is also enough of an incentive for these borrowers to refinance. Specifically, speeds on FNMA 2006 6s were up 11% from last month compared with previous expectations of a 6% increase. In FHLMC Golds, 2006 5s and 6s were up 12% from March.

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