Investors should continue buying mortgage bonds tied to U.S. home loans because they are unlikely to suffer a wave of refinancings that would cut yields, according to analysts at JPMorgan Chase & Co.

Congressional action would be required to trigger any significant "government-sponsored refi wave" in the market for bonds owned or guaranteed by Fannie Mae and Freddie Mac, Matthew Jozoff, a JPMorgan Chase analyst, wrote in a research note last week.

"We continue to believe that such a large-scale event is highly unlikely," Jozoff wrote. "Fannie and Freddie could not unilaterally cut mortgage rates on existing private mortgages around the country, nor could the Treasury."

Government-backed mortgage bonds rallied compared with Treasuries last week by the most since July 23, according to Barclays Capital index data.

Too many mortgage refinancings would hurt bondholders by reducing the average interest rate backing the securities they purchased.

Though applications to refinance existing mortgages are at the highest in more than a year, Jozoff said he does not expect another major increase.

Mortgage bond buyers are being "well compensated for the prepayment uncertainty," he wrote.

Only congressional action could force large-scale loan modifications on Fannie- and Freddie-backed bonds, he said.

"While we thought all along that the odds of the 'nuclear' refi option were low, we point out that the mechanics of implementing such a program are not quite as simple as a stroke of the pen," he wrote.

The Obama administration plans to unveil yet another refinancing program in the next few weeks to help borrowers who are struggling to pay their mortgages.

This month, the Federal Housing Administration created its third refinancing program in two years and claimed it could help as many as 1.5 million people who are current on their mortgages but owe more than their homes are worth. Analysts said participation would be much lower because servicers would be required to write down a loan's principal by at least 10%.

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