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Mortgage-bond price tumbles amid increased risks

Fannie, Freddie witness significant drops

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According to an article in Bloomberg, prices of a new type of U.S. mortgage bond are tumbling as investors discover the risks in the market from Wall Street banks. 

The $8.2 billion of risk-sharing securities sold in the last year by government-controlled Fannie Mae and Freddie Mac can shift their losses from homeowner defaults to bond buyers. One slice of a deal issued in May traded at 95.7 cents on the dollar yesterday, down from 99.7 cents at the end of last month, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Source: Bloomberg
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