Fed Purchases $21.125BN Agency MBS in Week Ending July 22

The Federal Reserve today reported on their weekly purchases of agency mortgage-backed securities (MBS). In the five trading days between July 16 and July 22, the Federal Reserve purchased a gross total of $21.245 billion agency MBS. During this period the Federal Reserve sold $120 million agency MBS, bringing their weekly net purchases total to $21.125 billion.

Since the inception of the program the Federal Reserve has spent $681.90 billion or 54.5% of the allocated $1.25 trillion.

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.

Of the net $21.125 billion weekly purchases:

$525  million was used to buy 30 yr 4.0 MBS coupons. 2.49%   of total weekly purchases.

$11.4 billion was used to buy 30 yr 4.5 MBS coupons.  53.96% of total weekly purchases.

$6.75 billion was used to buy 30 yr 5.0 MBS coupons.  31.95% of total weekly purchases.

$1.60 billion was used to buy 30 yr 5.5 MBS coupons.  7.57%   of total weekly purchases.

$150 million was used to buy 15 yr 4.0 MBS coupons. 0.71%   of total weekly purchases.

$700 million was used to buy 15 yr 4.5 MBS coupons. 3.31%   of total weekly purchases.

The Fed's daily average of MBS purchases was $4.225 billion per day, less than the previous week's average of $4.4434 per day, but still more than enough to easily absorb originator supply between July 16 and July 22. This implies the Federal Reserve continues to provide more than enough liquidity to borrowers looking to purchase or refinance near record low rates.

Of particular note, in the previous reporting week the Federal Reserve's MBS purchases were concentrated in 4.5 coupons (67% 4.5s vs. 25% 5.0s).  However this week the Fed purchased slightly less 4.5 coupons and a few more 5.0 coupons (54% 4.5s vs. 32% 5.0s). This illustrates how originator MBS supply selling correlates to mortgage rates. As the Fed's concentration of purchases shifts towards higher MBS coupons, mortgage rates increase. This in line with the Freddie Mac rate survey which indicated that, in the week ending July 23, 30 year conventional mortgage rates rose bnsix basis points to 5.20% from 5.14%. READ MORE

Here is a chart illustrating the evolution of the Federal Reserve's Agency MBS Purchase Program...