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Overseas agency MBS purchases jump in March

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Foreign investor purchases of mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac jumped in March and turned positive net of prepayments for the first time in seven months, according to analysts at Bank of America Merrill Lynch. Overseas purchases of agency MBS grossed $14.6 billion in March. Paydowns, or prepayments on the amount of agency MBS debt, totaled $10.6 billion, resulting in a net of $4 billion. The biggest uptick came from the United Kingdom, analysts said. Net purchases from the U.K. reached $288 million, up from a net paydown of $3.4 billion one month ago. "Demand out of the UK is typically driven by hedge fund purchases and not by central bank purchases," analysts said. "In our view, this pick up in demand represents opportunistic buying from hedge funds after the Japanese earthquake resulted in a sell off in risky assets." Analysts added there was a "significant increase" in U.S. stock purchases in March. But long term demand for agency MBS remains weak, leaving the uptick in March as a "one-off event." "The size of current purchase programs from overseas investors is not large enough to offset runoffs in the portfolios of overseas investors," analysts said. Write to Jon Prior. Follow him on Twitter @JonAPrior.

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