Mortgage-Bond Yields Fall to Lowest in Month as Fed Delays Taper

Yields on Fannie Mae and Freddie Mac mortgage securities that guide U.S. home-loan rates dropped to the lowest level in more than a month as the Federal Reserve refrained from slowing its bond purchases.

A Bloomberg index of Fannie Mae’s current-coupon 30-year securities dropped about 0.13 percentage point to 3.46 percent at 2:17 p.m. in New York, the lowest since Aug. 8. The yields, which reached 3.81 percent on Sept. 5, have jumped from as low as 2.28 percent in May as speculation grew that the Fed would pare monthly debt purchases that include $40 billion of government-backed mortgages securities.

“The Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases,” the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington. While “downside risks” to the outlook have diminished, “the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement.”

A measure of relative yields on the Fannie Mae current coupon debt, or bonds trading closet to face value, declined to about the lowest since June 19. Yields on the securities fell about 0.02 percentage point to 1.34 percentage point higher than an average of five- and 10-year Treasury rates, down from as high as 1.51 percentage point in July.

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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