Big investors in the $5trn mortgage-backed securities market are unlikely to reinvest cash from Fannie Mae and Freddie Mac as the companies strip bad loans from the bonds, Scott Simon, a managing director at PIMCO, said on Friday. A lack of reinvestment may surprise analysts who for weeks have predicted principal would be dumped back into the market and support prices, which affect consumer rates. This would soften any blow as the Federal Reserve ended its $1.25trn MBS purchase program in March, analysts have said. But the reinvestment issue is “overblown,” Simon said on the Pacific Investment Management Co. Web site. The Fed, US Treasury, Freddie Mac, Fannie Mae and Asian central banks probably won’t reinvest in MBS as the mortgage finance giants address delinquent loans, he said.

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