April 10, 2013
In February, prepays fell slightly after a large rise in January, due to a large increase in voluntary prepayments. While voluntaries fell slightly, they remain significantly above 2012 levels. As for the detail, overall prepayments fell 5% to 7.43% from 7.84% in January.
In comparing prepayment speeds for the first month of 2013 to the same period in 2012, we see an increase of 33%, 7.63% versus 5.72%.
As for the largest sector of the market, 20+ years to maturity, prepayment speeds fell by 4% to 6.37% from 6.64% in January.
Turning to the CPR breakdown, the default CPR fell by 8% to 2.53% from 2.76%. This reading is the second highest since last May, only exceeded by last month. ing 3% to 4.90% from 5.08%. This represents the second highest reading since October, 2008. This month represents the second month in a row of voluntary prepayments near 5%, a significant move from the 3%- 4% range we saw in late 2012.
However, March hints at a return to last year’s range, at least for one month. Specifically, preliminary data from Colson suggests a sub-6% reading, with a voluntary number in the 3%-4% range, which is more in line with 2012 numbers.
Turning to the default/ voluntary prepayment breakdown, the Voluntary Prepay CPR (green line) fell to 4.90% from 5.08%, a 3.5% decrease. While the VCPR fell below 5%, the Default CPR (red line) moved lower by 8.5% to 2.53% from 2.76% the previous month.
Prepayment speeds fell in five out of six maturity categories.
Decreases were seen, by order of magnitude, in the 16-20 sector (-39% to CPR 6.33%), 8-10 (-35% to CPR 7.31%), 13-16 (-10% to CPR 5.92%), <8 (-7% to CPR 9.77%) and 20+ (-4% to CPR 6.37%). The lone increase was seen in 10-13, rising 7% to CPR 10.53%.
The second month of 2013 resembled the first, with prepayments above 7%. However, early returns suggest a drop back toward 2012 numbers in March, at least for one month.