As discussion among top regulators and industry groups continues on whether sweeping regulatory reform should include broader authority for the Federal Reserve to oversee bank holding companies and systemically significant firms, the Fed continued its multi-billion-dollar campaign in the mortgage-backed securities market. The New York Fed on Thursday released details on a slower week of agency mortgage-backed securities (MBS) purchases as part of a program regulators say is designed to provide liquidity for the agencies to invest in new securities, which should encourage mortgage lending abroad. In the week ending June 17, the Fed’s gross MBS purchases totaled $23.08bn, less than half the $54.67bn seen the week before. The Fed bought $7bn from Freddie Mac (FRE), $12.43bn from Fannie Mae (FNM) and $3.65bn from Ginnie Mae. The weekly purchases favored MBS with 30-year maturations and 4.5% coupons. Of the $10.28bn of this product the Fed bought this week, $7.1bn settles in July and the remaining $3.18bn settles in August. As an ongoing part of the Fed’s participation in the so-called “dollar roll” market — a purchase agreement where the seller traditionally sells the security now under an agreement to buy it back in the future at a lower price — the NY Fed noted MBS sales of $2.79bn in the same week. Of the Fed’s sales, $1.7bn occurred in 30-year MBS with 5% coupons, a transaction that settles in June. Another $200m sales of 30-year 6s will settle in July, while $800m of 15-year 4s settles in June and $85m of 15-year 5s will settle in July. The sales and purchases, which started at the beginning of the year, have made a lasting mark on the Fed’s balance sheet, which shows the balance growing by $29.41bn in the week ending June 10 to a total of $2.06trn. The figure sits $1.18trn above the balance seen in the same year-ago week ending June 18, 2008, and includes a total $455.34bn of MBS held outright. Write to Diana Golobay. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.

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