Fed Purchases $3.62 Billion Agency MBS per day Last Week

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The Federal Reserve today reported on their weekly purchases of agency mortgage-backed securities (MBS). In the five trading days between October 15 and October 21, the Federal Reserve purchased a total of $18.75 billion agency MBS. In those five days the Federal Reserve sold (dollar rolls) $650 million agency MBS. After sales, the Fed's weekly net purchases was $18.1 billion.

The goal of the Federal Reserve's agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program. The program includes, but is not limited to, 30-year, 20-year and 15-year securities of these issuers.

Since the inception of the program the Federal Reserve has spent $959.13 billion, or 76.7% of the allocated $1.25 trillion which is scheduled to run out in March 2010.

Of the net $18.10 billion purchases made in the week ending October 21:

  • $200  million was used to buy 30 year 4.0 MBS coupons.  1.1 percent of total weekly purchases
  • $2.70 billion was used to buy 30 year 4.5 MBS coupons.   14.9 percent of total weekly purchases
  • $6.08 billion was used to buy 30 year 5.0 MBS coupons.  33.6 percent of total weekly purchases
  • $7.03 billion was used to buy 30 year 5.5 MBS coupons.  38.8 percent of total weekly purchases
  • $1.80 billion was used to buy  30 year 6.0 MBS coupons.  9.9 percent of total weekly purchases
  • $200 million was used to buy 15 year 4.0 MBS coupons.  1.1 percent of total weekly purchases
  • $100 million was used to buy 15 year 4.5 MBS coupons.  0.6 percent of total weekly purchases

Of the $18.1 billion net total. 47% of the mortgage-backs purchased were Fannie Mae coupons while 37% were Freddie Mac, and 16% Ginnie Mae.

The Fed's daily purchase average was $3.62 billion per day, a decrease from last week's daily average of $4.02 billion per day.

A slowdown in daily purchases is expected to continue as the Federal Reserve slowly exits from the agency MBS market. Up to this point the gradual withdrawal has not affected the performance of MBS coupons against benchmarks. This is a function of a slowdown in new production from originators.

Here is a chart illustrating the evolution of the Federal Reserve's Agency MBS Purchase Program. Notice the trend of less and less weekly purchases