Fed’s Gross Weekly MBS Purchases Gain as Sales Double

The Federal Reserve Bank of New York purchased another $41.45bn in gross agency mortgage-backed securities (MBS) this week from government-sponsored entities Freddie Mac (FRE), Fannie Mae (FNM) and Ginnie Mae after last week’s $30.4bn gross purchases, according to a late-Thursday announcement. The Fed purchased, net of $15.25bn in coupon sales, $26.2bn in agency MBS in the week ending April 22, a pick-up from last week’s $21.75bn in net purchases. The Fed bought a gross $9.5bn from Freddie’s books, $30.2bn from Fannie and $1.7bn off Ginnie’s books this week. The Fed’s purchases continued to favor MBS with 30-year maturities and 4.5% coupons, at a $17.55bn price tag from all agencies. The Fed also purchased $4.25bn in 30-year 4.5% coupons. Meanwhile, the Fed sold $8.84bn of 30-year 5.5% coupons. See a detailed table of the current week’s purchases and sales. Since the Fed began listing the settlement months of the transactions — when the purchases and sales should affect the Fed’s balance sheet — weeks ago, a noticeable discrepancy arose on a weekly basis in terms of the settlement months of coupons bought and sold. For example, of the Fed’s hot ticket purchase item, 30-year 4.5s, a whopping $16.45bn is set to hit the Fed’s balance sheet in June, while the Fed’s only weekly sales of the same coupon listed Thursday — a relatively small $500m — affects the Fed’s balance sheet in April. The Fed plans to buy $8.75bn of the 30-year 5.5% in May, although it won’t sell $8.61bn of the same coupon until June. The Fed began listing sales weeks into the program and settlement months only recently, however, indicating a long history of MBS purchases that outweigh sales. The effect shows on the Fed’s balance sheet, which sits about 150% above its value at the same time last year, according to a balance sheet summary released Thursday. The Fed’s assets rose by $70.36bn the week ending April 22. The data show the Fed’s consolidated balance sheet rose to a value of $2.17trn for the week, from $2.09trn the week before, and is up $1.3trn from the year-ago week ended April 23, 2008. Write to Diana Golobay at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.