Increased prepayment speeds paired with limited reinvestment opportunities have led to spread compression in the European RMBS market of late, but a lack of prepayment data remains a hindrance that needs to be explored. Fitch Ratings held a conference call last week investigating the dynamics of prepayment drivers in European RMBS and prepayment behavior analyses on a country-by-country basis.

According to Fitch, European investors are finding what U.S. investors have long experienced: Unpredictable prepayments make it difficult to predict the average life of a transaction. For the first time, European investors are seeing the accelerated return of principal resulting from a higher prepayment-rate environment.

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