Portfolio Runoff

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Portfolio Runoff

A reduction in the mortgages represented in a mortgage-backed security as a result of prepayment of some of the mortgages in it. This can reduce the yield on an MBS and, at times, force the security holder to reinvest proceeds at a lower coupon rate than the MBS paid. Most mortgage-backed securities provide safeguards against portfolio runoff unduly affecting yields. See also: Prepayment risk.