Prepay Speeds Decelerate in June.(Speed Watch)

Byline: Terry Peters

Prepayment rates for mortgage-backed securities fell 9.5% overall in June from a constant prepayment rate of 13.1 CPR to 11.9 CPR, according to Credit Suisse.

Writing in the "June 2008 Fixed Rate Prepayment Commentary," Credit Suisse researchers Mahesh Swaminathan and Chandrajit Bhattacharya reported that the speeds of 30-year 2007 5.5% coupons slowed by a constant prepayment rate of 1 CPR, while 6.0% and 6.5% coupons declined 3 CPR.

The Credit Suisse analysts also reported that the estimated net issuance of fixed-rate MBS declined from $67.5 billion in June to $58.9 billion, a decrease of 12.8%.

The estimated net issuance of 30-year Fannie Mae and Freddie Mac MBS fell from $47.4 billion to $39.6 billion, while estimated issuance of 30-year Ginnie Mae securities jumped from $14.6 billion to $18.6 billion, they said.

The Credit Suisse analysts predicted that speeds would decline further in July.

"Despite an increase in day counts in July, we expect prepayments on moderately seasoned premium paper to decline by 15-20% for 30-year coupons and by 19-24% for 15-year coupons in light of the [40 basis-point] increase in mortgage rates during June," the analysts said. "Speeds on seasoned discounts are expected to decline more modestly, by about 5-10% during the same period."