Investors should be "cautious" about buying U.S. home-loan bonds because a rally stoked by cash "spilling in from the sidelines" may fizzle within months, according to Barclays Capital Inc.

This is a danger partly because the housing slump has not eased as much as suggested by home-price data, analysts at the bank, including Ajay Rajadhyaksha and Glenn Boyd, wrote in a report published Friday. While an S&P/Case-Shiller index for May showed the first month-over-month price increase since 2006 and a 2% seasonally adjusted annualized drop, a more accurate reading probably would have been an annualized decline of 10% to 15%, they wrote.

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