Interest in prepayment-protected paper has increased with the drop in mortgage rates, which  has also led to increasing pay-ups for this kind of paper.

A cheap alternative to HLBs that investors should consider, Deutsche analysts said, is 80-90 LTV bonds. They noted that pay-ups currently are on the order of one to two ticks in 5.5s and 6s. By comparison, 5.5% loan balance paper is around 16 ticks for LLB, 12 ticks for MLB and 8 ticks for HLB and for 6%s, 22 ticks for LLB, 16 ticks for MLB and 12 ticks for HLB.

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