After posting their worst returns since 1999, government-backed mortgage bonds are starting 2013 with losses on speculation the end of Federal Reserve purchases is in sight and as homeowner refinancing roils the market.
Prices in the market for Fannie Mae and Freddie Mac mortgage bonds are incorrectly forecasting a 55 percent chance of a “government-induced refi spike” in the next year, according to Credit Suisse Group AG.
Yields on Fannie Mae and Freddie Mac mortgage securities that guide U.S. home-loan rates set record lows after the Federal Reserve said it would buy more U.S. government debt as its housing-bond holdings pay down.
Lenders could lose $168 billion if banks sell loans into the Public-Private Investment Partnership at market prices instead of their balance-sheet valuation, Jamie McGee and Margaret Chadbourn of Bloomberg News report, citing estimates in regulatory filings.
In Honolulu, on the southern coast of the island of Oahu, there’s a four-bedroom home priced at $785,000 that has views of the sun setting over the Pacific Ocean. The beaches of Waikiki are 15 minutes away.
Yields on Fannie Mae mortgage securities that guide U.S. home-loan rates climbed to the highest in three months after the Federal Reserve said yesterday it will trim its total monthly bond purchases by $10 billion. A gauge of company credit risk fell to the lowest since 2007.
Mortgage securities with U.S. government backing offered their best returns to start a year since 2002 as the Federal Reserve drained supply from the market and then investors piled into the bonds because of their relative safety amid Europe’s sovereign crisis.