U.S. home loan bonds without government backing rallied further, and as financing for investors revives, securities composed of so-called option adjustable-rate mortgages led the gains last week.
Typical prices for the senior-most securities backed by option ARMs, with potentially growing balances, rose 3 cents on the dollar, to 53 cents, last week, bringing the past month's rally to 7 cents, according to Barclays Capital Inc. data.
Similar bonds backed by fixed-rate, prime-jumbo loans rose 1 cent last week, to 85 cents, up a nickel from a month earlier.
The $1.7 trillion market for nonagency mortgage securities has been climbing after a record collapse that began in 2007. The rally across debt markets has pushed investors to accept lower potential yields, and traders anticipate demand from the federal government's Public-Private Investment Program. Recent increases also reflect the return of repurchase agreement, or repo, loans used by buyers to amplify returns, according to the Barclays analysts.
The jumbo bonds are up from lows in mid-March of about 63 cents, and the option-ARM securities have climbed from 35 cents late that month, according to Barclays.