April 13, 2016
By Bob Judge
Editor, CPR Report
In February, prepays fell below CPR 7% for the first time since last March.
The cause of this decrease was a double-digit fall in both defaults (CDR) and voluntary prepayments (CRR).
Specifically, defaults fell by 11% to record the second lowest reading since 1999, coming in at CDR 0.60%.
For the record, defaults have remained below CDR 2% for 30 months in a row.
Turning to the details, overall prepayments fell by 11% to 6.92% from 7.73% the previous month.
In comparing YOY prepayment speeds for 2016 versus 2015, the YTD is currently 4.40% lower than last year, CPR 7.32% versus CPR 7.76%.
As for the largest sector of the market, 20+ years to maturity, prepayment speeds fell by 4% to 6.74% from 7.03%.
Regarding the CPR breakdown, the CDR decreased by 11% to 0.60% while the CRR fell by 11% to 6.31%.
Preliminary data for next month suggests that prepayments will move further below 7% as voluntary prepayments move still lower in the early months of 2016.
Regarding our maturity buckets, prepayment speeds fell in four out of six categories.
Decreases were seen, by order of magnitude, in the 13-16 year sector (-57% to CPR 5.07%), 16-20 (-38% to CPR 5.98%), 10-13 (-30% to CPR 6.06%) and 20+ (-4% to CPR 6.74%).
Increases were seen, also by order of magnitude, in <8 (+120% to CPR 29.61%) and 8-10 (+52% to CPR 12.62%).
Through two months, 2016 has performed much better than we expected and next month promises to be even better, as we finish up the first quarter with sub-7% prepayment speeds.