Fed MBS Purchases on Hold at $16 Billion

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

In the five trading days between December 3 and December 9, the Federal Reserve purchased a total of $27.25 billion agency MBS. In those five days the Federal Reserve sold $11.25 billion agency MBS, most of which were Fannie 5.0 coupons (dollar rolls). The Fed's weekly net purchase total was $16.00 billion. This is the fourth consecutive week purchases have come in at $16.00 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 in January 2009, the Fed has spent $1.07 trillion in the agency MBS market, or 85.65 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 December 9:

• $400  million was used to buy 30 year 4.0 MBS coupons. 2.50 percent of total weekly purchases
• $8.35 billion was used to buy 30 year 4.5 MBS coupons.  52.19 percent of total weekly purchases
• $2.55 billion was used to buy 30 year 5.0 MBS coupons.  15.94 percent of total weekly purchases
• $3.10 billion was used to buy 30 year 5.5 MBS coupons.  19.38 percent of total weekly purchases
• $1.00 billion was used to buy  30 year 6.0 MBS coupons. 6.25 percent of total weekly purchases
• $600  million was used to buy 15 year 4.0 MBS coupons. 3.75  percent of total weekly purchases

60.3 percent of the mortgage-backs purchased were Fannie Mae MBS, 30.3 percent were Freddie Mac coupons, and 9.3 percent were Ginnie Mae coupons.

The Fed's daily purchase average was $3.2 billion per day, in-line with recent daily purchase 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 MBS coupons last week…over 50%. These are called “production” or “current” coupons and represent loan supply being sold in the secondary mortgage market by loan originators.

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