The stock market had a massive day.
March 18 (Bloomberg) — Yields on agency mortgage-backed securities tumbled to the lowest in more than a month relative to U.S. Treasuries amid speculation that capital constraints may be eased at Fannie Mae and Freddie Mac.
The difference in yields on the Bloomberg index for Fannie Mae‘s current-coupon, 30-year fixed-rate mortgage bonds and 10- year government notes narrowed about 8 basis points to 161 basis points, or 76 basis points less than the 22-year high reached two weeks ago. The spread helps determine the interest rate on new prime home mortgages of $417,000 or less.
Capital requirements for Fannie Mae and Freddie Mac, two of the biggest buyers of mortgage assets, may be eased though not removed, the Wall Street Journal reported yesterday. Their regulator should allow the companies to expand their portfolios with “the right kind of loans” to aid the slumping housing market, House Financial Services Committee Chairman Barney Frank said in a telephone interview from Washington yesterday.