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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: patron_anejo_por_favor who wrote (28020)	3/7/2005 2:34:08 PM
From: russwinter	Respond to of 110194

Let me know if I'm reading this right as this release is a bit convoluted, but looks like Joe Sixpack, is even willing to prepay his 30 year fixed, to jump on the IO bandwagon? Takes recklessness and leverage to a new level. UPDATE 1-U.S. mortgage bond prepayments rise in Feb Mon Mar 7, 2005 01:41 PM ET By Julie Haviv UPDATE 1-U.S. mortgage bond prepayments rise in Feb US mortgage bond prepayments rise in Feb - Freddie NEW YORK, March 7 (Reuters) - Prepayments on U.S. mortgage bonds increased last month in response to a drop in mortgage rates in late January and early February, Wall Street analysts said on Monday. Analysts estimated that about $49 billion in fixed-rate mortgages that backed bonds guaranteed by Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research) were paid down in February, compared to January's $46 billion. Overall, 30-year Fannie Mae and Freddie Mac mortgage-backed securities prepaid at an aggregate conditional prepayment rate of 16.2 percent, about 4 percent faster than the 14.5 percent CPR in January, Citigroup analysts said. The conditional prepayment rate is the principal measure that traders and investors employ to quantify prepayment activity in mortgage passthroughs. A rise in the CPR reflects a higher likelihood of bonds being prepaid sooner than expected, which typically forces investors to reinvest the funds in lower-yielding securities Dale Westhoff, senior managing director of mortgage research at Bear Stearns, said the biggest surprise in the numbers was that Fannie Mae prepayments on 30-year 6.0 percent coupons and higher were virtually unchanged from January levels. Premium coupons are currently paying over 20 percent below the levels seen in October and November of last year even though mortgage rates are almost unchanged, he noted in commentary. "This bodes well for the performance of premium coupons/IOs (interest-only mortgages) going forward, however, most of the recent decline can be attributed to seasonal patterns and speeds are likely to rebound sharply in the March report," Westhoff said. February's prepayment speeds reflect borrower response to an average 30-year mortgage rate of 5.77 percent, according to Credit Suisse First Boston analysts. February's prepayment changes on mortgage-backed securities came in line to slightly faster than Wall Street expectations, with the speed on Freddie Mac's mortgage bonds increasing more than Fannie Mae's issues. After last month's prepayments, net issuance of fixed-rate mortgage bonds was approximately negative $6 billion versus the positive $8 billion registered in January. Paydowns on fixed-rate MBS are seen rising by 35 percent to 40 percent to $68 billion in March, according to JP Morgan. The increase results from the fact that there are 3.5 additional collection days in the month and seasonal turnover is 30 percent higher, the firm said. Also, the Mortgage Bankers Association's refinancing index implies a significant pick-up in activity. JP Morgan said the trend upward should end in April where it expects a drop of about 10 percent, due to the recent back-up in mortgage rates and two fewer collection days. The rise in prepayments should impact all coupons, but speeds on 5.0 percent and 5.5 percent coupons should pick up the most, according to Citigroup.