Mortgage Bonds Drop 22% in June: Bloomberg

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.

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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

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