With the Fed’s exit from agency MBS, private investors are back in the driver seat for agency MBS demand, but only time will tell if the market can sustain itself. The New York Federal Reserve Bank bought another $6bn of agency mortgage-backed securities (MBS) in the week ending March 31. The $1.25trn purchasing program, now complete, met its goal to wind-down by the end of March. The Fed bought a total $6.074bn of MBS this week — $5.174bn of Freddie Mac (FRE) MBS and $900m of Fannie Mae (FNM) MBS. The Fed bought no Ginnie Mae MBS in its last week of purchases, and reported no MBS sales in the same week. It marks a final slow-down from $8bn last week. Barclays Capital calculated last week the Fed’s purchases totaled nearly $1.244trn — or 99.5% of the Fed’s total purchasing power under the program. With the new week of $6.074bn of purchases, the Fed’s program is 100% complete. The Federal Reserve last month decided to exit the program at the end of March, despite earlier consideration of a possible expansion and extension of government-led initiatives to buy MBS. The Fed’s exit from agency MBS has sparked investor fears MBS bond yield spreads to Treasuries may blow out again from recent historic tights, when the government withdraws its significant demand for securities. Write to Diana Golobay. Disclosure: The author holds no relevant investment positions.
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