The clock is ticking as the days remaining under a government purchase program of agency mortgage securities draw to a close. The New York Federal Reserve Bank bought another $10bn of agency mortgage-backed securities (MBS) in the week ending March 17 as the $1.25trn program, now 99% complete, winds down to a scheduled completion by the end of the month. The Fed bought a total $10.6bn MBS this week — $4.8bn of Freddie Mac (FRE) MBS, $5.4bn of Fannie Mae (FNM) MBS and $400m of Ginnie Mae MBS. The Fed also reported $601m of Fannie MBS sales in the same week, bringing net purchases to $10bn, level with last week. The latest week of reporting brings total net purchases to $1.24trn — or nearly 99% of the Fed’s $1.25trn purchasing power — according to weekly research by Barclays Capital. The majority, or 57%, of net purchases so far were of MBS issued by Fannie. Freddie MBS came in second, accounting for 34% of net purchases, while Ginnie MBS took the remaining 9%: The Fed has $14bn left to spend under the program and 10 business days of purchases remaining. The Federal Reserve this week 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 Treasurys may blow out again from recent historic tights, when the government withdraws its significant demand for securities. Bond dealers see positive signs, however, that high prepay speeds in the midst of delinquent loan buyouts by the agencies are keeping spreads tight, as bondholders reinvest in Fannie and Freddie collateral. Write to Diana Golobay. Disclosure: The author holds no relevant investment positions.

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