The Agency prepayment report released today covering September speeds showed massive declines in the lowest coupons, said a report released by Bear Stearns. For example, 2003 FNMA 5.5s slowed 45% while 6.0s dropped 35%. In contrast, seasoned 6.0s through 7.0s slowed only by 5% to 20%, which is considerably less than expected. These figures suggest that the processing delay between new and seasoned MBS was quite significant in the last leg of the refinancing wave.

The prepayment report released this morning also indicated that September speeds seem to be driven by a Refinancing Index level of 4900 (from 7/11/03 to 8/8/03), said a JPMorgan Securities report. JPMorgan stated that a similar analysis would have shown that August speeds applied to a 7000 Index, suggesting roughly a 30% decline. Analysts added that the actual speeds were mostly in-line with their projections, although the 35% drop for low WALA 6s was somewhat surprising.

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