Mortgage securities issued by government agencies--Fannie Mae (FNM), Freddie Mac (FRE) and Ginnie Mae--climbed to 15-year highs Wednesday as investors sought investments that are as safe as Treasurys but offer better returns.

These bonds, which are effectively guaranteed by the U.S. government, now trade above their face value. Fannie Mae 30-year bonds with a 4.5% coupon rose to $103.406 for each $100 of face value. The 4% coupon bond rose as high as $101 before dropping back to $100.781.

At those prices, these so-called agency bonds yield about 1.5% more on an annual basis than comparable Treasury securities, and many buyers consider them just as safe as Treasurys.

"Mortgages have become a flight-to-quality instrument," said Mahesh Swaminathan, a strategist with Credit Suisse.

The perception that these bonds are guaranteed by the U.S. government, which took control of the faltering agencies in the depths of the credit crisis, has been a lure to many foreign investors.

Central banks and other overseas buyers increased their holdings of agency bonds by $10.5 billion in April, according to the latest Treasury data. That compares with typical monthly increases of $2 billion to $4 billion earlier in the year.

Banks also have been big buyers of these bonds since they can borrow cheaply in the short term and invest in these higher-yielding long-term bonds with little fear that short-term rates will rise any time soon.

This so-called carry trade got an extended lease on life after the Federal Reserve's policymaking Federal Open Market Committee said Wednesday that it planned to keep its benchmark short-term Fed Funds rate below 0.25% for an extended period, said Ajay Rajadhyaksha, head of fixed income research at Barclays Capital.

Adding momentum to the price rise is a dearth of new bonds. Home sales are still depressed, and refinancings have tapered off as many homeowners eligible to reduce their mortgage payments have already done so.

Historically, when mortgage bond prices climb this high--pushing down yields, which move inversely to price--homeowners would rush to refinance. That would serve to damp the market by removing the high-yielding loans in bonds, a phenomenon called prepayment risk. But rates have been so low for so long that fewer homeowners see a need to refinance.

"Prepayment risk is at its lowest than in most times in the past, and that's why prices keep rising," Rajadyaksha said.

There are skeptics in the market. Some portfolio managers said they are anxious about buying mortgage bonds at these sky-high prices.

"Supply-demand imbalance is keeping valuation on MBS very tight, and unattractive to buyers like us," said Todd Abraham, portfolio manager at Federated Investors of Pittsburgh, with $5 billion in mortgage investments.

-By Prabha Natarajan, Dow Jones Newswires; 212-416-2468; prabha.natarajan@dowjones.com