Mortgage securities with federally backed guarantees are trading at record high prices on speculation homeowner refinancing will fail to accelerate, and as the supply of the bonds remains limited.

The average price of $5.2 trillion of bonds guaranteed by Fannie Mae and Freddie Mac or the Government National Mortgage Association climbed to 106.3 cents on the dollar Wednesday, according to a Bank of America Merrill Lynch index. That's up from 104.2 cents on March 31, when the Federal Reserve ended its program of purchasing $1.25 trillion of the debt.

"It's gotten insane," said Scott Simon, the head of mortgage-backed securities at Pacific Investment Management Co., manager of the world's biggest bond fund. "This is rarefied air."

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