Slight Acceleration Seen in Prepay Speeds.

New York -- Prepayment rates on 30-year fixed-rate mortgages in agency mortgage-backed securities increased only a tepid 3% in July, according to Bear Stearns & Co.

Overall speeds on 30-year Fannie Mae collateral stood at a constant prepayment rate of 23 CPR, up only 1 CPR from those recorded in June, while 30-year Freddie Mac collateral prepaid at 21 CPR, said Bear Stearns analyst Steven Bergantino.

Meanwhile, Ginnie Mae speeds actually fell by 1 CPR in July, to 27 CPR.

"The primary cause for the weak July numbers was a two-day drop in the number of business days," Mr. Bergantino said. "The 20-day business calendar in July, compared with 22 days in June and 23 in August, has probably pushed a number of mortgage closings that could have taken place in July into the adjacent months."

Despite the "generally muted response of July prepayments to refinancing opportunities," discount speeds remained at historically high levels, he said.

For example, fully seasoned 5.0% coupons registered an 18 CPR in July, "more than 75% above historical current coupon prepayment rates even after adjusting for seasonal effects on turnover," Mr. Bergantino reported. "Moreover, these elevated discount prepayment rates have persisted in the face of a pronounced flattening in the mortgage yield curve over the last several months."

Mr. Bergantino said the high discount speeds represent "a strong indication of the lasting influence of cash-out refinancings on fixed-rate prepayments."