Several types of mortgage debt were left trading at their lowest prices of the year in June following a nosedive in trading prices for U.S. home-loan bonds without government backing, reports Bloomberg citing a recent Bank of America report.
Prices for certain subprime mortgage securities dropped almost 22% last month, according to the June 28 report, even though returns remain positive with gains of 12.5% in 2013 among subprime-backed bonds.
However, losses this year for other non-agency securities amount up to 4%, while bonds tied to “prime-jumbo” and Alt-A loans are now trading below values seen toward the end of 2012, according to Bloomberg.
One factor in declining trading prices for debt is concern among investors for Federal Reserve chairman Ben Bernanke’s plans to taper off quantitative easing. Recent comments he made in a news conference in mid-June indicating plans to wind down the stimulus program later this year have shaken up credit markets and sparked an increase in interest rates.
“The non-agency market is likely to remain volatile over the near term,” Barclays analysts wrote in a June 28 report cited by the article. “We believe that current prices represent attractive entry points for investors with long-term capital, who are able to take some mark-to-market volatility.”
Read the full article at Bloomberg.
Written by Alyssa Gerace