The Real Deal New York

US mortgage securities post biggest gain since 2008

January 31, 2014 01:39PM

Government-backed U.S. mortgage securities are expected to net big monthly gains as investors seek alternatives to sputtering investments in developing countries.

In the $5.4 trillion market, returns averaged 1.5 percent in January — the biggest jump since a 1.7 percent gain in 2008. The increase comes atop the debt’s 1.4 percent loss last year, when investors braced for the Federal Reserve to ease up on its bond buying program, according to Bank of America Merrill Lynch index data cited by Bloomberg.

As turmoil spread across emerging markets such as Argentina and Turkey in January, U.S. mortgage securities leapt — despite Fed promises to further slice its purchases in February.

“Fed demand remains formidable despite the tapering,” Anish Lohokare and Timi Ajibola, strategists in New York at BNP Paribas SA, wrote in a Thursday report cited by Bloomberg. [Bloomberg]Julie Strickland