Fed Purchases $22.17bn Agency MBS in Week Ending July 15

The Federal Reserve today reported on their weekly purchases of agency mortgage-backed securities (MBS). In the five trading days between July 9 and July 15, the Federal Reserve purchased a gross total of $22.980 billion agency MBS. During this period the Federal Reserve sold $810 million agency MBS, which brought their weekly net purchases total to $22.17billion.

Since the inception of the program the Federal Reserve has spent $660.78 billion or 52.8% of the allocated $1.25 trillion.

The goal of the Federal Reserve's agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program. The program includes, but is not limited to, 30-year, 20-year and 15-year securities of these issuers.

Of the net $22.17 billion weekly purchases:

$600 million was used to buy 30 yr 4.0 MBS coupons. 2.71% of total weekly purchases.

$14.90 billion was used to buy 30 yr 4.5 MBS coupons. 67.21% of total weekly purchases.

$5.60 billion was used to buy 30 yr 5.0 MBS coupons. 25.26% of total weekly purchases.

$610 million was used to buy 30 yr 5.5 MBS coupons. 2.75% of total weekly purchases.

$10 million was used to buy 30 yr 6.0 MBS coupons. 0.05% of total weekly purchases.

$100 million was used to buy 15 yr 4.0 MBS coupons. 8.50% of total weekly purchases.

The Fed's daily average of MBS purchases was $5.542 billion per day, much higher than the previous week's average of $4.262 per day. Originator supply between July 9 and July 15 averaged close to $2.5 billion per day, which implies the Federal Reserve continues to provide more than enough liquidity to loan originators looking to sell their loans.

Furthermore, in the previous reporting week the Federal Reserve's purchases were evenly spread out over 4.5 and 5.0 MBS coupons, whereas this past week the Fed's MBS purchases were concentrated in 4.5 coupons. This illustrates how originator MBS supply selling correlates to mortgage rates. As the Fed purchases higher dollar amounts of lower MBS coupons, mortgage rates move lower. This in line with the Freddie Mac rate survey which indicated that, in the week ending July 16,rn30 year conventional mortgage rates fell six basis points to 5.14%.

Here is a chart illustrating the evolution of the Federal Reserve's Agency MBS Purchase Program…

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