The Farley-Buneman instability is a collisional two-stream instability observed in the E region ionosphere at altitudes in the range of 95--110 km. While linear theory predicts the dominant wavelengths, it cannot fully describe the behavior of this nonlinearly saturated instability as observed by radar and rocket measurements. We simulate the behavior of this instability in the plane perpendicular to the Earth's magnetic field, using a two-dimensional hybrid code which models electron dynamics as a fluid and ion dynamics with a particle-in-cell approach. The results show the growth, saturation, and nonlinear behavior of the instability for a much longer period of time than was possible with the pure particle codes used in previous studies. This paper describes the spectra from these simulations and compares them to the observed spectra. Both the simulations and observations show that (1) type I spectra result from saturated two-stream waves for a broad range of elevation angles, (2) the phase velocity of these waves is below that predicted by linear theory, (3) mode coupling leads to type II-like spectra without the presence of a plasma density gradient as often thought necessary, (4) longer wavelengths due to mode coupling develop, and (5) spectral power decreases at a rate of 0.3 dB/degree of elevation angle. ¿ American Geophysical Union 1996