Treasury’s mortgage debt sale to up rates

When the Treasury Department begins unwinding its mortgage debt portfolio later this month, it’s likely to put upward pressure on mortgage rates at a time when the U.S. housing market is already seeing declines in sales volume and prices, analysts told CNBC. The government is planning to sell around $10 billion worth of mortgage-backed securities that were guaranteed by Fannie Mae and Freddie Mac — a relatively small portion of the $142 billion it currently holds. “The question is, ‘who [will] be their buyers?’ Obviously it’s going to be major funds. But are they willing to take the paper at this time or are they willing to gamble in terms of returns?” asked Peter Cardillo, chief economist at New York-based Avalon Partners. “They’re going to have a hard time unloading this without moving rates higher.” [CNBC]