Fed Mortgage Bond Program, March 26 to April 1 (week 13)

This week was the thirteenth week of a mortgage bond purchase program by the Federal Reserve—here’s week 12. Beginning on March 26 and ending on April 1, the Fed bought $32.9b net of mortgage bonds—below is a table breaking down the amounts for each coupon and maturity across the three agencies that issue mortgages: Fannie Mae, Freddie Mac, and Ginnie Mae. The largest single investment was into 5.5% coupons which represent outstanding loans in the 6%-6.5% range. They eased off this week on buying 4.0% and 4.5% 30yr fixed Fannie and Freddie bonds, which represent outstanding loans in the 4.75%-5.125% range. And it showed in rates, with rates not dropping much.

As we’ve been discussing in our weekly reports, the Fed has been using their mortgage bond buying to elevate mortgage bond prices which pushes rates down. But it depends on which coupons they buy week to week.

The press speculation is that Fed stimulus will help drive rates even lower than they are now. This isn’t as likely because rates have already dropped to historical lows and the Fed is up against private selling pressure. The longstanding money manager strategy is to buy agency MBS and then sell before the Fed does. So as we move through the year, the increased budget is ostensibly enough to offset private selling but probably not enough to bring rates down drastically from current levels.

If we couple this with lenders who are extremely strained on staffing levels and issue bigger rate markups to control volume, it’s another reason consumers shouldn’t wait too long to capture record low rates.

What Mortgage Bond Buying Means for Rates And Consumers
See this report for a detailed description of the Fed program and what it means for consumers. Also you can see this story for another consumer-friendly description of what’s going on. We will continue to monitor this weekly like we have been—to try to help consumers make decisions but the gist is: rates are all-time lows, so if you can get the right price on a property purchase you’ll get a record low rate to go with it. And if you’re looking to refi, this year is your time.

Tally Of Mortgage Bonds Bought By Fed
The Fed, according to their own reporting, has bought $311.45b of mortgage bonds, which is 24.9% of their allotted $1.25t target by December.