Mortgage bonds lagged U.S. Treasury notes amid concern the Federal Reserve may be slow to raise interest rates again, making some homeowners more likely to refinance their underlying loans.
Central bank Chairman Alan Greenspan said last night there's "scant evidence of any imminent resurgence of inflation," suggesting to some investors that a rate increase is unlikely, at least in the near term."I'm in the camp saying it was an indication they aren't going to raise rates this month," said Mark Miller, who manages $500 million in bonds at Kayne Anderson Investment Management in Los An-ge-les.
Government National Mortgage Association current coupon 7.5 passthroughs for delivery in June rose 10/32 to 99 14/32, for a yield of 7.67 percent. The yield premium, or "spread," they pay over 10-year Treasury notes widened 1 basis point to 100 basis points.
Still, some investors say rates have a long way to drop before droves of homeowners start lining up to refinance.