The difference in yield between agency mortgage securities and government notes fell to the lowest level in more than 17 years Wednesday, as the Federal Reserve's program to purchase $1.25 trillion of home-loan bonds bolsters the market.

The yield spread between Fannie Mae's current-coupon 30-year fixed-rate mortgage bonds and 10-year Treasuries narrowed by about 1 basis point, to 66 basis points, as of 10:31 a.m. in New York.

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