MBS analysts are trying to figure out whether GNMA discounts will continue to pay down faster than their conventional counterparts.

JPMorgan Securities expects that speeds will be even between 2003 GNMA and FNMA 5s this year, but with a marginal bias towards GNMA speeds. "The latter are biased upwards due to a combination of high delinquencies, high mortgage insurance costs and the new GNMA hybrid ARM program," JPMorgan analysts said. They mentioned that in 2000, GNMA discounts were roughly in line to slightly faster when compared to conventionals, which is in direct contrast to what happened in 1994.

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