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U.S. mortgage bond prices extend fall after FOMC

[October 30, 2014]  NEW YORK (Reuters) - Prices on U.S. 30-year agency mortgage-backed securities extended their earlier decline Wednesday mid-afternoon after the Federal Reserve as expected decided to end its monthly purchases of MBS and Treasuries.

Prices on 30-year mortgage-backed securities that carry a 3-percent coupon and are guaranteed by Fannie Mae fell to a session low of 99-25/32, down 11/32 from late on Tuesday.

The yield on the 30-year, 3-percent Fannie Mae MBS issue was 3.02 percent, up 4 basis points on the day.

In other areas of the bond market, Treasury Inflation-Protected Securities lagged regular Treasuries as the Fed acknowledged the recent decline in oil prices has clamped down on domestic inflation, although it still expects inflation to achieve its 2 percent goal.

The inflation breakeven rate of yield gaps between TIPS and nominal government debt narrowed in reaction to the latest Fed policy statement.

The 10-year TIPS breakeven rate was 1.92 percent, up fractionally on the day after being quoted as high 1.95 percent before the release of the statement.

(Reporting by Richard Leong; Editing by Meredith Mazzilli)

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