May prepayments were in-line to slightly faster than consensus expectations, especially for GNMAs. Speeds were expected to be unchanged to slightly faster for 4.5s, 5s, and 2004 vintage 5.5s and 6s, while other coupons and vintages were expected to slow around 5% on average. Instead, speeds on higher coupons were mostly faster, while lower coupons and unseasoned vintages picked up more than expected. Still, the report, which reflected May activity, was generally uneventful. Overall, prepayments remain fast on discounts, while premiums remain little impacted by rate levels.
JPMorgan Securities reported that paydowns were $52 billion, versus expectations of around $50 billion, resulting in $5.5 billion of net supply. With increases in speeds expected for June, analysts predict overall fixed-rate agency supply to be negative $8 billion.