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Originally published Saturday, February 1, 2014 at 8:01 PM

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U.S. mortgage bonds now a hot market

Returns in the $5.4 trillion market averaged 1.5 percent in January through Thursday, the largest advance since a 1.7 percent gain in December 2008, according to Bank of America Merrill Lynch index data.


Bloomberg News

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Government-backed U.S. mortgage securities were poised this past week for their biggest monthly gain since 2008 after posting their first annual losses in 19 years, as investors seek havens amid turmoil in developing nations.

Returns in the $5.4 trillion market averaged 1.5 percent in January through Thursday, the largest advance since a 1.7 percent gain in December 2008, according to Bank of America Merrill Lynch index data.

The debt lost 1.4 percent last year as investors braced for the Federal Reserve to slow its buying of the bonds and of Treasurys, reductions that began in January.

January’s gain in government-backed U.S. mortgage securities came amid a rout in emerging markets from Argentina to Turkey and signs of weakness in the world’s two biggest economies. The “Fed demand remains formidable despite the tapering,” Anish Lohokare and Timi Ajibola, strategists at BNP Paribas, wrote in a report. Comments by a Treasury Department official suggesting limits on any potential expansion of a Fannie Mae and Freddie Mac refinancing program for homeowners with little or no equity separately helped boost higher-rate securities.



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