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“Foreign investors are really one of the major reasons that there hasn’t been a problem since the Fed stepped away,” said Scott Wede, managing director and head of pass-through, CMO and ARM trading at Barclays Capital.
U.S. government backing has given new cache to ‘AAA’ U.S. agency mortgage-related securities that were sold off by overseas accounts during the global financial crisis.
Risk premiums are holding near record lows a month after the Fed sopped up $1.25 trillion in mortgage bonds and almost $175 billion in agency notes. A brief weakening swiftly lured buyers including overseas accounts.
“When foreign investors were making purchases two to three years ago, our federal government didn’t own any mortgages,” said Wede. “They may feel like they have partners in this now and they can go back in and buy mortgages.”
Read more: http://www.reuters.com/article/idUSTRE6444U320100505
