As Rates Rise, Fed Holds Steady
Yields on U.S. Treasury bonds rose in March and April and yields on mortgage-backed securities continue to increase, pushing 30-year fixed home loans up to 5.44 percent—the highest rate for mortgages since early February.
The Federal Reserve is buying Treasurys and mortgage-backed securities (MBS) in an attempt to keep borrowing costs low and to provide the financial system with money for lending.
However, there is some concern about the amount of borrowing needed to fund the campaign, which has resulted in the purchase of $130.5 billion in long-term Treasury debt and $481 billion in MBS so far. Yet the market still believes the central bank will expand its purchases in order to restrain long-term rates.
Source: The Wall Street Journal, Jon Hilsenrath and Liz Rappaport (05/29/09)