2012-09-08sfgate.com

``A measure of relative yields on Fannie Mae and Freddie Mac mortgage securities that guide home-loan rates tumbled to the lowest in five years. A Bloomberg index of yields on Fannie Mae- guaranteed mortgage bonds trading closest to face value fell about six basis points to 114 basis points. It was the narrowest spread since 2007.

Traders increased bets inflation will rise. The difference between yields on conventional 10-year U.S. notes and comparable Treasury Inflation-Protected Securities widened to 2.37 percentage points, the most in five months. It represents the bond market's expectations for the average rate of inflation during the life of the debt. The average gap in 2012 is 2.19 percentage points.''


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