NY Fed to concentrate agency MBS buys to TBA market

The Federal Reserve Bank of New York plans to concentrate purchases of new agency mortgage-backed securities to the To-Be-Announced market as per the central bank’s decision to reinvest principal from maturing agency debt back into agency MBS. The NY Fed, which conducts open market activities for the Federal Reserve, published a list of frequently asked questions to address the monetary policy decision by the Federal Open Market Committee last week. Only fixed-rate, agency MBS guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible for purchase. The NY Fed said these assets include, but are not limited to, 30-year and 15-year securities. The NY Fed will begin the agency MBS purchases next Monday, Oct. 3, and stop reinvesting principal from agency debt and agency MBS into Treasury securities. The Fed’s trading desk plans to buy about $10 billion in agency MBS between Monday and Oct. 13, which will be about equal to the amount of principal payments from agency debt and agency MBS expected to be received over that period. The central bank expects its decision to “help support conditions in mortgage markets.” “This policy will contribute to a stronger economic recovery and help ensure that inflation over time is at levels consistent with the Federal Reserve’s mandate to foster maximum employment and price stability,” according to the NY Fed. Write to Jason Philyaw. Follow him on Twitter: @jrphilyaw.