Prepayment speeds are expected to decline around 16% for 30-year FNMAs in the November report to be released next month, with 2004 and 2003 6s expected to show the largest slowing at 18% to 20%. Speeds actually increased slightly in these vintages in October. UBS analysts attributed the gains in 6% coupons to borrower perception that this would be the last opportunity to refinance in the near future, considering sharply higher mortgage rates.
FHLMC Gold cohorts slowed, widening the difference in speeds for this coupon. However, UBS expects FNMA 6s will slow more than FHLMC Golds in the next report, pushing the differential closer to zero.