The turmoil in Asia has helped cool investment in mortgage-backed securities.

Portfolio managers said the economic crisis overseas could push interest rates lower in the United States, worsening the risk that the loans backing the securities will be prepaid.

"We've underweighted mortgages and moved into Treasuries," said Leslie A. Falconio, assistant vice president at Oppenheimer Funds.

Ms. Falconio co-manages $1.5 billion invested in mortgage-backed securities and Treasuries in two Oppenheimer funds: the Limited Term Government Fund, a shorter-duration fund, and the U.S. Government Fund, which is of intermediate duration. Both funds' portfolios looked substantially different six months ago, she said.

"We'll never hold a position in something that is really refinanceable," she said. "We don't want to take the risk of holding something that has very high prepayment risk in collateral."

OppenheimerFunds uses a "barbell approach" that mitigates prepayment risk by holding discount collateral and high coupon collateral, said Ms. Falconio.

Six months ago the fund was invested heavily in higher-coupon collateral and collateralized mortgage obligations, with most holdings out of the refinancing range, she said.

By September 1997, the focus was shifted down the coupon curve to maintain longer-duration funds. During the past three months, Oppenheimer Funds have been trying to decrease price compression.

Oppenheimer expects that Treasury yields will rise again as the Asian crisis "becomes a little mitigated" after the first quarter, she said. She predicts that attention will turn to the domestic economy and the low inflation, strong growth, and tight labor markets in the United States.

"We're going to go from underweight to somewhat neutral, even given the market rally, because we think that people are going to have a lot more money to invest,"she said.

Franklin Templeton Group in San Mateo, Calif., has kept an eye on mortgage prepayments, especially for the Franklin Adjustable U.S. Government Securities Fund which invests heavily in adjustable-rate, mortgage-backed securities, said T. Anthony Coffey, portfolio manager.

"Asia and low inflation argue for lower rates and the extent to which the situation in Asia impacts domestically could certainly carry the day," he said. "On the other hand, you have consistently strong demand in the U.S."

Mr. Coffey uses a buy-and-hold strategy. "A lot of the securities that we owned are relatively seasoned securities, in excess of five years," he said.

"Our view right now is somewhat that we're going to be in a trading range over the near term."

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