As Fannie Mae and Ginnie Mae released reports on their prepayment data last week, many market participants were surprised by how muted the declines in prepayment speeds were - and especially surprised by a reported increase in speeds for some high premiums.

According to prepayment specialist Warren Xia, vice president and senior analyst at Banc of America Securities, Fannie Mae 30-year discount (6% and 6.5%) prepayments increased sharply in June, reflecting the seasonal strength in home sales. Speeds of Fannie Mae premium coupons, however, were insensitive to the rise in mortgage rates.

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