Mortgage-Bond Spreads Fall to Record Low as Fed Starts Buying
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A measure of relative yields on mortgage securities dropped to the lowest on record after the Federal Reserve said it will expand its purchases, extending a rally that offered hedge funds returns of 15 percent in a week.
A Bloomberg index of yields on Fannie Mae-guaranteed mortgage bonds trading closest to face value fell about 1 basis points to 92 basis points, or 0.92 percentage point, higher than an average of five- and 10-year Treasury rates as of 3 p.m. in New York. That’s the narrowest spread since at least 1984 for the securities that guide U.S. home-loan rates.