Yields on Fannie Mae and Freddie Mac mortgage bonds that guide U.S. home loan rates rose to the highest in more than 14 months as the Federal Reserve said risks to the economy have decreased, fueling speculation it will reduce the pace of its bond buying from $85 billion a month.
Fannie Mae’s 3.5%, 30-year securities jumped about 0.2 of a percentage point to 2.9% as of 3:10 p.m. in New York on Wednesday, the highest since April 2012, according to data compiled by Bloomberg. Yields have climbed from the record-low 1.68% reached in September, when the central bank said it would start buying $40 billion of home loan debt a month to begin its third round of bond purchases.
Fed Chairman Ben Bernanke said at a press conference Wednesday that the U.S. central bank may “moderate” the pace of its buying later this year and end the purchases around the middle of 2014. Members of its Federal Open Market Committee don’t foresee sales of housing debt following soon after, he said.
“A strong majority now expects the committee will not sell agency backed mortgage-backed securities during the process of normalizing monetary policy, although in the longer run, limited sales could be used to reduce or eliminate residual MBS holdings,” Bernanke said in Washington.
Mortgage rates have soared the most in a decade on speculation the Fed’s purchases may slow. The interest rate on a 30-year fixed home loan climbed to a 14-month high of 3.98% last week, according to
