Not Quite Sure What This Means...
I just received notice from my broker that some Fannie Mae bonds that I bought several years ago are being called. These were bonds that have a 6.5% coupon, due in 2037, and that cost me slightly below par. Since they are redeeming the bonds for the full par value, that means that I get 1-2% capital gain, and I earned 6.5% interest each year the last several years. That was a decent return for a very low risk investment.
That the bonds are being called would indicate that the underlying mortgages have been paid off--perhaps because of a refinance of the loan, or the sale of the house. Either way, this is probably a good thing for the borrowers, and probably a good sign for the economy.
I am expecting interest rates to rise--perhaps quite catastrophically--in the next year or two, so now I have to figure out where to invest this money in the meantime that gets a decent return, and yet doesn't lock me into the current not very impressive interest rates.