The June prepayment report, released today, showed prepayments on FNMA 30-year 5.5s increased to an “eye-popping” 42% CPR, which is a 159% rise from May, said analysts from Credit Suisse First Boston.

The strong refinancing response is because these borrowers, who had average balances of $160,000 to $167,000, were faced with a first-time opportunity to refinance during this reporting period. Recently originated 30-year conventional 5.5s set the prepayment pace for the June report — speeds increased sharply in 2002 and 2003 vintages, said Bear Stearns in a report released this morning.

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