The Federal Reserve Bank of New York yesterday said it had started its $500bn plan to drive down US mortgage rates by buying securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae, the government-run mortgage financiers.

Mortgage bond yields fell sharply as a result, extending a dramatic decline that followed the New York Fed's announcement of the programme on November 25. Thirty-year agency mortgage securities yielded 190 basis points over Treasuries yesterday, compared with 208bp on Friday.