US mortgage bonds garnered record excess returns in April

NEW YORK (Reuters) - U.S. mortgage-backed securities enjoyed a banner month in April, with excess returns over Treasuries at their highest since at least 1997, according to Merrill Lynch & Co.

Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) said the excess return of the MBS index in April was 1.546 percent, the highest one-month result since the company started calculating excess returns in January 1997, Carrie Gray, spokeswoman for the company, said in an e-mail.

The stellar performance was largely due to robust buying from an array of investors, particularly government-sponsored enterprises Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz). Overseas demand from Asia, in particular, also played a pivotal, analysts say.

Investors in general have increased their risk appetite in recent weeks, becoming more comfortable buying spread products as the credit crisis showed signs of easing.

(Reporting by Julie Haviv)