Yields on Fannie Mae, Freddie Mac, and Government National Mortgage Association mortgage bonds rose for a fifth day Monday relative to government notes, with the spread becoming the widest in two months and potentially boosting home loan rates.
The difference between yields on Fannie's current-coupon 30-year fixed-rate mortgage securities and 10-year Treasuries widened about 4 basis points, to 207 basis points, as of 8:50 a.m. in New York, according to data compiled by Bloomberg.
Agency mortgage-bond spreads have widened since plunging a week ago by the most since their record Sept. 8 drops after the federal government seized Fannie and Freddie. Over the past two months spreads have narrowed as investors heeded a government pledge to support the market to lower home loan rates, then widened as concern mounted that demand will fall from buyers such as banks and hedge funds who rely on borrowed money.
"The market is anxious for immediate gratification," JPMorgan Chase & Co. analysts led by Matthew Jozoff in New York wrote in an Oct. 24 report.
Agency mortgage bonds had returned 77 basis points less than U.S. Treasuries in October through last week, putting the debt on pace for its worst month since July 2007, according to Lehman Brothers index data.
