After posting their worst returns since 1999, government-backed mortgage bonds are starting 2013 with losses on speculation the end of Federal Reserve purchases is in sight and as homeowner refinancing roils the market.

The slump spans from new low-coupon securities the U.S. central bank is targeting to bonds backed by higher-rate loans more damaged by refinancing, the biggest portion of the $5.3 trillion market. A Bank of America Merrill Lynch index has lost 0.19 percent this month after returning 2.59 percent in 2012.