Pimco Sees Taper in Worst MBS Slump Since 1999: Credit Markets

U.S. government-backed mortgage bonds are heading toward their longest monthly slump since 1999 as concern mounts that the Federal Reserve will begin paring its debt purchases even as the steepest rise in home-loan rates in at least 40 years slows the housing rebound.

Securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae lost 0.33 percent through yesterday, heading for their fourth month of declines and bringing losses since April to 2.78 percent, according to Bank of America Merrill Lynch index data. For almost a year, the Fed has been adding $40 billion of bonds to its balance sheet each month from the more than $5 trillion market. It expanded the purchases in January to include $45 billion of Treasuries.