Fed Taper Brings Risk to Mortgage Bonds Unseen in Treasuries
- Central bank may purge mortgages, keep some sovereign bonds
- U.S. 30-year fixed home-loan rate has risen from record low
Fed's Taper Plan & Mortgage Debt
This article is for subscribers only.
For all the talk that Janet Yellen’s plan to shrink the Federal Reserve’s balance sheet will hurt Treasuries, U.S. mortgage bonds face a bigger test.
The securities are already lagging behind Treasuries for the first time since 2011. Investors are demanding 29 basis points of extra yield to buy the bonds instead of Treasuries, with the spread almost tripling from 2016’s low, Bloomberg data show. Firms including Allianz Investment Management and Federated Investors say the spread widening probably isn’t over.