Yields on Fannie Mae and Freddie Mac mortgage bonds that guide U.S. home-loan rates extended increases sparked by a potential slowing of the Federal Reserve’s debt purchases.
Fannie Mae’s current-coupon 30-year securities climbed 0.2 percentage point to 3.6% at 10:27 a.m. in New York, the highest level since August 2011, according to data compiled by Bloomberg. The yields have risen from a record-low of 1.68% reached Sept. 26, after the Fed announced it would start buying $40 billion of government-backed housing debt a month, embarking on its third round of so-called quantitative easing to spur growth.
Bonds are tumbling worldwide as the central bank moves closer to scaling back its $85 billion in monthly debt buying, which includes $45 billion of Treasuries. Chairman Ben Bernanke said June 19 at a news conference following a statement by the Federal Open Market Committee that the central bank may “moderate” the pace later this year and end the purchases around the middle of 2014 if the economy continues to improve as it forecasts.
“With investors generally expecting Bernanke to calm recent volatility, the Fed statement,” surprised markets, JPMorgan Chase & Co. analysts led by Matt Jozoff in New York said in a report last week. “A continued sell-off is clearly the main threat to the mortgage market right now.”
The average cost of new 30-year, fixed-rate home loans climbed to 4.36% on June 21, from a record low 3.36% in December, according to Bankrate.com data.
