Prepayment Rates Hold Steady in August.

Agency MBS speeds held steady for 5.0% and 5.5% coupons but rose as much as 12% for higher coupons in August, strength largely attributable to the number of business days, according to Bear Stearns & Co.

Bear Stearns analyst Dale Westhoff said the "strong numbers" resulted from the three additional business days in August, which he said "clearly offset" the rise in mortgage rates that took place during that time.

The speeds of discount mortgage-backed securities maintained their record pace in August, Mr. Westhoff said, pointing to the rise of the huge 2003 vintage 5.0% coupon from a constant prepayment rate of 18.4 CPR in July to 19.1 CPR.

"This pace continues to be over 50% faster than historical averages and reflects rising home prices and vigorous cash-out refinancing activity," Mr. Westhoff said. "It is important to note that so far the massive flattening in the yield curve has had little impact on discount/current coupon MBS prepayments."

The Bear Stearns analyst said the only somewhat surprising aspect of the August report was the higher-than-expected speeds of some seasoned coupons above 5.5%.

"To some extent the surge in seasoned coupon prepayments this month offset their muted response to stronger incentives last month," he said.

Mr. Westhoff said speeds are likely to slow significantly in September.