Mortgage-Bond Yields Jump to 14-Month High on Fed Statements

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 percent, 30-year securities jumped about 0.2 percentage point to 2.9 percent as of 3:10 p.m. in New York, the highest since April 2012, according to data compiled by Bloomberg. Yield have climbed from the record-low 1.68 percent 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 S. Bernanke said at a press conference today 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 percent last week, according to data compiled by Freddie Mac.

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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