Home Page U.S. mortgage-backed bond yield spreads mixed By Aleksandrs Rozens NEW YORK, March 23 (Reuters) - U.S. mortgage-backed securities prices were unchanged to slightly weaker while mortgage bond yield spreads were mixed early Monday. A portfolio manager with a Northeast fund management firm said mortgage bonds with lower coupons were 1/32 wider, while 6 percents were 1/32 narrower in spread to Treasuries. Some of the widening in lower coupon spreads early this session likely is related to lender sales, said a salesman with a dealer firm. These sales likely were prompted by a slight rise in U.S. yields. Lenders usually sell mortgage debt when rates rise because they expect borrowers to close on mortgage applications with any increase in borrowing costs. Early on Monday, the yield on 10-year Treasury notes <US10YT=RR>, a proxy for U.S. 30-year mortgage rates, was at 3.73 percent. The bond salesman said dealings this session have been active. He said recent sessions have seen some buyers of 5 percents and there has been selling in 6 percents. "It seems like the investing public is agreeing rates will remain flat or lower throughout the year," said the bond salesman. If U.S. rates remain at their current levels or drop, investors will stick to lower coupon bonds to avoid prepayment risk. Higher coupons are expected to see greater prepayments because these securities are backed by home loans more likely to see refinancings. Meanwhile, investors are placing more attention on events overseas such as heightened Mideast tensions that could affect U.S. Treasury yields. "We were probably watching headlines and news yesterday as much as people watched basketball Thursday and Friday," said the trader with the regional dealer firm, referring to the annual March college basketball games in the U.S. that capture the interest of trading desks. On Monday, concerns about Mideast tensions weighed on U.S. stocks but appeared to have little immediate impact on Treasury futures trade, said the portfolio manager with a Northeast fund management firm. "People are worried, but the bond market was quiet," he said. A pickup in worries about Mideast tensions could prompt some investors to put their money to work in a safe haven like U.S. Treasuries. This better buying could then inflame worries about low rates, refinancings and prepayments. More News: 3-23-04 IRS targets wealthy for audits 3-23-04 Chain Store Sales Post Healthy Gains 3-23-04 Corporate tax cut hung up on overtime pay 3-23-04 Credit Card Delinquency Spikes 3-23-04 Feds shelve mortage simplification proposal 3-23-04 Gasoline Pump Prices Hit All-Time High 3-23-04 Greenspan OK with home debt 3-23-04 Jobless recovery, no restraint fuels debt pressure 3-23-04 Market Lull a Chance to Change Portfolio 3-23-04 Report Says Medicare to Go Broke by 2019 3-23-04 Seniors running up debt on their credit cards 3-23-04 Snow; Hiring to Increase as Orders Fatten 3-23-04 US Q4 credit card delinquencies at new high 3-23-04 US Treasury-big changes needed to fix AMT tax plan             Financial News

 

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