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To: Ahda who wrote (16579)8/25/1998 7:00:00 PM
From: goldsnow  Read Replies (2) | Respond to of 116762
 
Trading desks reported mortgage-related buying of 10s. As interest rates fall, homeowners tend to pay off their mortgages at a higher speed. These higher prepay speeds result in holders of mortgage bonds receiving their principal back quicker.

This is a negative in an environment of falling rates, since the bond investor must then reinvest the proceeds of maturing mortgage bonds in bonds that offer lower rates of return.

cbs.marketwatch.com