Like in 2011, when a rally in mortgage bonds was disrupted by Europe’s debt crisis, the market has recently become more challenging as Fed officials signal they may slow their $85 billion in monthly bond buying as the economy shows signs of strengthening.

Former Deutsche Bank AG banker Neil Ahuja’s Premium Point Investments LP saw its mortgage credit fund lose an estimated 3.4 percent last month, to leave it up 5.9 percent this year, according to people familiar with its return.

The credit fund run by MKP Capital Management LLC, which oversees $7.3 billion, fell 4.6 percent, to trim its gains to 5 percent. Don Brownstein’s Structured Portfolio Management LLC’s SPM Core fund fell an estimated 2.5 percent to expand 2013 losses to 8.4 percent.

Spokesmen for the companies declined to comment.

While various types of government-backed mortgage bonds have cheapened, the opportunity isn’t as attractive as non- agency debt, according to Teichholtz.

Interest-only and inverse interest-only securities, debt that loses value when homeowners refinance, has recovered after a rout sparked by concern about potential government policy changes.

“That’s the one market that actually got bailed out when interest rates sold off so hard,” he said. “We still think there’s value there, but not as much as we were hoping for.”

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