Yields on Fannie Mae and Freddie Mac mortgage bonds that guide U.S. home-loan rates climbed to the highest in almost a year as Federal Reserve Chairman Ben S. Bernanke told Congress the central bank may cut the pace of bond purchases in the “next few meetings.”
Fannie Mae’s 3 percent, 30-year securities jumped 0.19 percentage point to 2.67 percent as of 4:59 p.m. in New York, the highest since May 29, 2012, according to data compiled by Bloomberg. The yields have risen from the record-low 1.97 percent reached in October after the Fed announced it would start buying $40 billion of government-backed housing debt a month to begin its third round of bond purchases known as quantitative easing.
The central bank’s bond buying has pushed down mortgage rates, helping property prices rally after a five-year housing slump and boosting homeowner refinancing that’s aided consumers and banks. Minutes of the Fed’s last meeting also released today helped fuel speculation that it may pull back on the program.
“It seems to me that the Fed is trying to prepare the markets for their eventual exit from QE,” Noah Estrin, a portfolio manager at Greenwich, Connecticut-based hedge fund Prologue Capital Inc., said in an e-mail. “The market is going to need to watch the data closely for the timing but I think it is a wake-up call for those that have been passively positioned.”
A number of Fed officials said at their gathering ended May 1 that they were willing to taper their debt purchases as early as the next meeting June 18-19 if economic reports show “evidence of sufficiently strong and sustained growth,” according to the minutes. Bernanke told lawmakers today that “if we see continued improvement, and we have confidence that that is going to be sustained, in the next few meetings we could take a step down in our pace of purchases.”
The average rate for a 30-year fixed mortgage rose to 3.51 percent in the week ended May 16, from this year’s low of 3.35 percent two weeks earlier and a nadir of 3.31 percent in November, according to Freddie Mac surveys.
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