The Federal Reserve could see 20% of its $1.11 trillion portfolio of agency MBS run off due to refinancings and other prepayments by July 2011, according to mortgage strategists at Credit Suisse.

"The paydowns should be around $233 billion over the next 12 months (August 2010-July 2011), if the 4.5% mortgage rate is sustained," a Credit Suisse mortgage securities Market Watch report said.

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