June prepayments were little changed from May speeds, and were in-line with expectations for the most part. It was noteworthy that FNMA 2003 vintage 4.5s jumped 10%, or 1 CPR, versus an anticipated 2% increase. Analysts at JPMorgan Securities suggested these are borrowers who likely paid points and were more than 150 basis points out-of-the-money in June. The firm's strategic principal trader David Montano also suggests there may have been a larger number of closings than normal on June 30, due to the "effective" four-day weekend associated with the Fourth of July.
The Freddie Mac prepayment report was also fairly uneventful with percentage changes similar to Fannie Mae's. Meanwhile, 2003 4.5s were the one exception with speeds declining by 6%. Overall, however, speeds on FNMAs and FHLMC Gold continue to converge.