As the GSEs continue to buy into the non-agency sector - converting "True TBA" securities into something more akin to non-agency MBS - and as the agencies' yearly loan limit increases, the prepayment risk between the jumbo non-agency market and the "True TBA" sector has converged, according to a recent report by Bear Stearns.

Bear Stearns says that this convergence trend, which is reflected in 2001 prepayment data, is expected to continue going forward. Investors should therefore "lock in" the additional spread advantage offered by non-agency product while it is still available.

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