The June prepayment reports were released late July 6 with speeds faster than expected on 3.5s and 4.0s as the underlying credit-eligible borrowers responded to the successive record lows in mortgage rates that began in early May. At the same time, they were slower than expected in the higher Home Affordable Refinance Progam or HARP-eligible coupons.

This led to better selling down in coupon from real and fast money to move higher, particularly into FNCL 4.5s which surged 10 ticks on Tuesday compared to +2 ticks on 4.0s, +4 ticks on 5.0s and +2+/32nds on 10-year notes on expectations that HARP speeds are near their peaks.

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