Bernanke Faith in Housing Seen Shaken in Bonds: Credit Markets

Borrowing costs for U.S. home buyers are poised to extend declines from the highest level in two years after the Federal Reserve unexpectedly refrained from slowing its debt buying and bolstered expectations for how long it will keep short-term interest rates at about zero percent.

A Bloomberg index of Fannie Mae securities that guide 30-year loan rates dropped about 0.2 percentage point yesterday, the most since last September, to 3.39 percent, the least since Aug. 9. Yields, which rose 0.02 percentage point as of 11 a.m. in New York, soared as high as 3.81 percent on Sept. 5 from 2.28 percent in May as speculation mounted that the central bank would pare its $85 billion of monthly bond buying including $40 billion of government-backed mortgage securities.