Mortgages Over 5% Mean Fed Purchases as Bonds Slump

Big question...are interest rates going to continue up or will the government be able to reverse this trend and lower long term market rates?

May 11 (Bloomberg) -- The world’s biggest investors are increasing bets that Federal Reserve Chairman Ben S. Bernanke will boost purchases of Treasuries as the steepest losses on government debt since 1994 send mortgage rates above 5 percent.

The slump in Treasuries the past seven weeks pushed yields on longer-maturity bonds up by more than half a percentage point and sent average rates on 30-year mortgages to the highest since the start of April, according to North Palm Beach, Florida-based Bankrate.com.

“The Fed needs to consider increasing its purchases of Treasuries,” said Stuart Spodek, co-head of U.S. bonds in New York at BlackRock, which manages $483 billion in debt. Spodek said he resumed buying Treasuries. “We are still in a recession. It’s quite bad. They need to stabilize long-term rates.”

Treasuries lost 3.93 percent this year, according to Merrill Lynch & Co.’s U.S. Treasury Master index, after gaining 14 percent in 2008