But, will the spreads tighten?
I doubt it.
* * * * * J B K * * * * *
San Francisco
The Federal Reserve's completion this week of its program to buy $1.25 trillion in mortgage bonds probably won't mean significantly higher U.S. home loan rates as investors return to the market, replacing the Fed.
Fixed mortgage rates likely will rise less than a quarter of a percentage point in the next three months, the smallest increase for the second quarter since a drop in 2005, according to estimates by Fannie Mae and Freddie Mac. The gain would add about $30 to the monthly payment for a $250,000 mortgage.
"What we are seeing is an effective handoff occurring between the Fed and industry buyers such as banks and pension funds," said Christopher Sebald, chief investment officer for Advantus Capital Management in St. Paul, Minnesota, which oversees $18.5 billion, including about $5.6 billion in mortgage bonds. "I thought the Fed's exit would leave a bigger void."
http://www.bloomberg.com/apps/news?pid=20601068&sid=aqM6cAXBnmfc
