Fed continues to provide market liquidity

Fed Purchases $17.050 Billion Agency MBS. Over Half of Allocated Funds Now Used

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The Federal Reserve today reported on their weekly purchases of agency mortgage-backed securities (MBS). In the four trading days between July 2 and July 8, the Federal Reserve purchased a gross of $23.250 billion Agency MBS. During this period the Federal Reserve sold $6.2billion agency MBS, which brought their weekly net purchases to a total of $17.050 billion.

Since the inception of the program the Federal Reserve has spent $638.61 billion, 51% of the $1.25 trillion that was allocated.

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 $17.050 billion weekly purchases:

$900 million was used to buy 30 yr 4.0 MBS coupons. 5.28% of total weekly purchases.

$6.850 billion was used to buy 30 yr 4.5 MBS coupons. 40.18% of total weekly purchases.

$6.750 billion was used to buy 30 yr 5.0 MBS coupons. 39.59% of total weekly purchases.

$500 million was used to buy 30 yr 5.5 MBS coupons. 2.93% of total weekly purchases.

$1.450 billion was used to buy 15 yr 4.0 MBS coupons. 8.50% of total weekly purchases.

$200 million was used to buy 15 year 4.5 MBS coupons. 1.17% of total weekly purchases.

The Fed's daily average of purchases was $4.263 billion per day, down from the previous week's average of $4.620 per day. Originator supply between July 2 and July 8 averaged just under $2 billion per day, which implies the Federal Reserve continues to provide more than enough liquidity to loan originators looking to sell their loans.

Here is a chart illustrating the evolution of the Federal Reserve's Agency MBS Purchase Program. Notice that more recently Fed MBS purchases have declined relative to their market participation during March and April. This reflects the recent rise in mortgage rates and the slowdown in application activity in the mortgage market.