Fed MBS Purchases Focus on New Loan Production

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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 November 12 and November 18, the Federal Reserve purchased a total of $17.23 billion agency MBS. In those five days the Federal Reserve sold $1.23 billion agency MBS (dollar rolls) bringing net purchases to a total of $16.00 billion, $2.5 more than the previous, holiday shortened week.

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.

This week's net purchases pushed the Federal Reserve's aggregate total over the one trillion dollar mark. Since the inception of the program in January 2009, the Fed has spent $1.02 trillion in the agency MBS market, or 81.8 percent of the allocated $1.25 trillion, which is scheduled to run out in March 2010.

Of the net $16.00 billion purchases made in the week ending November 18:

  • $500  million was used to buy 30 year 4.0 MBS coupons. 3.13 percent of total weekly purchases
  • $6.90 billion was used to buy 30 year 4.5 MBS coupons.  43.13 percent of total weekly purchases
  • $5.60 billion was used to buy 30 year 5.0 MBS coupons.  35.00 percent of total weekly purchases
  • $1.95 billion was used to buy 30 year 5.5 MBS coupons.  12.19 percent of total weekly purchases
  • $475  million was used to buy  30 year 6.0 MBS coupons. 2.97 percent of total weekly purchases
  • $575  million was used to buy 15 year 4.5 MBS coupons.  3.59  percent of total weekly purchases

Coupon purchases were much more evenly spread out across the three agencies this week. 

23.4 percent of the mortgage-backs purchased were Fannie Mae MBS, whereas last week 72.4 percent of purchases were Fannie Mae coupons. 36.8 percent were Freddie Mac coupons, an increase from 21.7 percent in the previous week. 39.7 percent were Ginnie Mae coupons compared to 5.9 percent last week.

The Fed's daily purchase average was $3.20 billion per day, a decrease from last week's daily average of $3.38 billion per day, but in line with recent averages.

Below is a chart illustrating the evolution of the Federal Reserve's Agency MBS Purchase Program. Notice the majority of Fed purchases were in 4.5 and 5.0 MBS coupons this week. These are called "production" or "current" coupons and represent loan supply being sold in the secondary mortgage market by loan originators. The Fed's purchases of production MBS coupons picked up this week because MBS prices tested record high levels which pushed mortgage rates to six month lows. Lower mortgage rates brought out more loan supply...and the Fed was there to provide liquidity to the lenders who were selling it.

This may be getting a little old at this point, but why not do it anyway...

Thank the Fed for keeping mortgage rates stable!

$228 billion left...