In a recent report, Citigroup Global Markets said that the mortgage market is still undervaluing the "cheap" convexity provided by low loan balance (LLB) pools.

LLB 5.5s are pools with balances averaging roughly $65,000. Compare this to an average loan balance of $175,000 for 2003 production 30-year FNMA 5.5s, as well as $169,000 for 2002 production 30-year FNMA 5.5s.

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