$1.25 trillion of quantitive easing hasn’t been enough to keep mortgage rates down. Will the government double down again?
Bloomberg: Yields on Fannie Mae and Freddie Mac mortgage bonds rose for a fourth day, after yesterday for the first time exceeding where they stood before the Federal Reserve announced it would expand purchases to drive down loan rates.
Yields on Washington-based Fannie Mae’s current-coupon 30- year fixed-rate mortgage bonds climbed to 4.3 per cent as of 10:25 a.m. in New York, the highest since March 10 and up from 3.94 per cent on May 20, data compiled by Bloomberg show.
The Fed, seeking to use lower home-loans rates to stem the housing slump and bolster consumers, said March 18 it would increase its planned purchases of so-called agency mortgage bonds by $750 billion, to as much as $1.25 trillion, and start buying government notes. Rising mortgage-bond yields, driven higher in part by climbing Treasury rates, means the Fed now “faces a challenge to its ability to sustain low mortgage rates,” according to Jeffrey Rosenberg at Bank of America Corp.
Here’s a chart of Treasuries from a week or so ago (via Market Ticker). Now it appears mortgage rates will follow.