Fed MBS Purchase Program Update: $101 Billion Left to Spend

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The Federal Reserve today reported on their weekly purchases of agency mortgage-backed securities (MBS).

In the holiday shortened work week between January 14 and January 20, 2010, the Federal Reserve purchased a total of $16.359 billion agency MBS. In those four days the Federal Reserve sold $4.359 billion (supported the roll market) for a net total of $12 billion purchases.

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 in January 2009, the Fed has spent $1.148 trillion in the agency MBS market, or 91.91 percent of the allocated $1.25 trillion, which is scheduled to run out in March 2010. This leaves $101 billion left to purchase MBS coupons in the TBA market.

Of the net $12.00 billion purchases made in the week ending January 20, 2010:

  • $300  million was used to buy 30 year 4.0 MBS coupons. 2.5 percent of total weekly purchases
  • $8.13 billion was used to buy 30 year 4.5 MBS coupons. 67.7 percent of total weekly purchases
  • $2.70 billion was used to buy 30 year 5.0 MBS coupons. 22.5 percent of total weekly purchases
  • $275  million was used to buy  30 year 6.0 MBS coupons. 2.3 percent of total weekly purchases
  • $300  million was used to buy 15 year 4.0 MBS coupons. 2.5 percent of total weekly purchases
  • $300  million was used to buy 15 year 4.5 MBS coupons. 2.5 percent of total weekly purchases


70 percent of the mortgage-backs purchased were Fannie Mae MBS, 11 percent were Freddie Mac coupons, and 19 percent were Ginnie Mae. 95 percent of purchases were 30 year MBS coupons.

The Fed's daily purchase average was $3.00 billion per day, an increase from last week's daily average of $2.80 billion per day. If the Fed were to evenly disperse the remaining $101 billion over the next 10 weeks, they would average $2.02 billion in purchases per day. Given the slowdown in the mortgage market, this should be enough to offset new loan production supply from originators.

Below is a chart illustrating the evolution of the Federal Reserve's Agency MBS Purchase Program. Notice over the past few months the Fed has reduced their purchases and used remaining funds to offset new loan production supply, 4.50 (RED) and 5.00 (GREEN) MBS coupons specifically,  which has helped keep mortgage rates low.