Last week, prepayment-model specialists Andrew Davidson & Co. released an industry study that said the better predictor of the mortgage current coupon yield, which is the refinancing rate that borrowers face, is the swaps market and not the Treasuries market.

"There's been a lot of movement in the last few years away from the use of Treasuries towards the use of the swap markets to value fixed-income instruments like mortgages," said Andrew Davidson, president of the Andrew Davidson & Co. "What's significant about this study is not just that it talks about that subject but that it helps quantify an approach for dealing with the need to relate the Treasury yield curve or the swaps curve to mortgage prepayments."

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