Fed Mortgage Bond Program, March 5-11 (week 10)

This week was the tenth week of a mortgage bond purchase program by the Federal Reserve—here’s week 9. Beginning on March 5 and ending on March 11, the Fed bought $27.1b 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 investment was into 4.5% 30yr fixed Fannie and Freddie bonds, which represent outstanding loans in the 4.75%-5.125% range. The next largest investment was into 5.5% and 6% coupons which represent outstanding loans in the 6%-6.5% range.

As we’ve been discussing, a two-tier strategy has emerged over the time that the Fed has been buying mortgage bonds. Tier one of the strategy is to have their investment last as long as possible. Tier two of the strategy is to drive rates down and hold them down. This week was the second largest single-week investment (behind last week) and they attacked both tiers of the strategy.

See last week’s report for a detailed description of the strategies and what it means for consumers. Also you can see this story for another consumer-friendly description of what’s going on.

Tally Of Mortgage Bonds Bought By Fed
The Fed, according to their own reporting, has bought $217.25b of mortgage bonds, which is 43.5% of their allotted $500b target by June. But Tier 1 of the Fed’s strategy can stretch out this budget and timeline quite a bit.

Since the Fed is now showing sales as well as purchases in their reports, here’s a more technical description of gross versus net MBS sales that Reuters did last week.