Mortgage bonds were little changed in early trading Monday, amid optimism that relatively steady yields in the months ahead would make it easier for investors to predict when the securities would be redeemed.
"We still think mortgages will perform well," said Ned Gerstman, who manages $3.5 billion of bonds at Chubb Corp. in Warren, N.J. Light yield swings "are going to be the state of the market," he said.
Benchmark Government National Mortgage Association current coupon 7% pass-throughs for delivery in September fell 3.125 cents, to $98.625, for a yield of 7.28%.
The yield premium, or spread, they pay over comparable Treasuries narrowed 1 basis point, to 90.
Investors have piled into mortgage bonds this month on the bet that higher rates would keep homeowners from rushing to refinance their loans.