Fannie Mae last week revealed that its mortgage portfolio declined by a 14.6% annualized rate, which follows a 10% annualized drop in January.

"We believe this reflects a pickup in prepayment speeds as the 10-year yield dipped earlier in the month, which accelerated liquidation from refis," said a UBS investment research report. The continued richness of mortgages versus Fannie debt - which hindered the GSE from buying new mortgages - is another factor in the decline.

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