Though speeds were slightly higher than expected in the July prepayment report that came out last week, analysts say the results were a mere intimation of what is yet to come. Significant increases are predicted in the coming months with peak speeds expected in the November prepayment report.

Art Frank, director of mortgage research at Nomura Securities, said that speeds were a little faster on the 6.5% coupon, and to some extent in the 7% coupon while prepays were only modestly faster in the higher coupons. He noted that the increase in speeds in the July report was a result of earlier fallout in application activity.

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