April 23, 2014
By Bob Judge
Editor, CPR Report
As in the previous five months, defaults remain sub 2%, the longest such stretch in our database, which goes back to 1999.
As for the detail, overall prepayments rose .07% to 8.10% from 8.09% in January. In comparing prepayment speeds for the first two months of 2014 to the same period in 2013, we see that this year is running 6.09% ahead of last year, 8.09% versus 7.63%.
As for the largest sector of the market, 20+ years to maturity, prepayment speeds rose by 7% to 7.91% from 7.43% in January.
Turning to the CPR breakdown, the default CPR rose by 10% to 1.59% from 1.44%. This level represents the 7th lowest since September, 1999 when our records began.
Regarding voluntary prepayments, they fell by 2%, coming in at 6.51% versus 6.65% in January.
Preliminary data for next month suggests that prepayments should fall back below 7% for the first time this year.
Turning to the default/voluntary prepayment breakdown, the Voluntary Prepay CPR (green line) fell to 6.51% from 6.65%, a 2% decrease.
While the VCPR remained above 6%, the Default CPR (red line) increased by 10% to 1.59% from 1.44% the previous month.
Prepayment speeds rose in three out of six maturity categories. Increases were seen, by order of magnitude, in the 13-16 year sector (+61% to CPR 4.18%), <8 (+23% to CPR 17.60%) and 20+ (+7% to CPR 7.91%).
Decreases were seen, also by order of magnitude, in the 8-10 year sector (-26% to CPR 8.73%), 10-13 (-13% to CPR 8.55%) and 16-20 (-4% to CPR 6.98%).
The first two months of 2014 suggest prepayments have risen into the 8% range this year. While we should see some sub- 7% prints over the next few months, it seems to us that prepayments will be higher this year versus last.