Fed to buy $35.2 billion of MBS this week

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The Federal Reserve has purchased about $32.7 billion in mortgage-backed securities so far this week from Fannie Mae, Freddie Mac, and Ginnie Mae, and is slated to spend another $2.5 billion by the close of business on Friday.

The orders are being carried out by a group of market specialists who work at the Federal Reserve Bank of New York in lower Manhattan, the same team that enacted a similar quantitative easing program, known as QE, during the financial crisis more than a decade ago.

The purchases are aimed at keeping credit flowing amid the spread of COVID-19. On Sunday evening the Fed announced its second emergency cut in two weeks, slashing its benchmark rate to near zero, and announced it would buy $700 billion of Treasuries and MBS.

The last time the central bank used a QE program, it put downward pressure on mortgage rates by increasing competition of bonds. That’s likely to happen again, said Frank Nothaft, CoreLogic’s chief economist.

Rates have bumped up more than a third of a percentage point from the all-time low of 3.29% hit during the first week of March, as measured by Freddie Mac. It’s possible the Fed’s MBS purchases could drive them below 3% in coming months, Nothaft said.

“It may not be tomorrow or next week, but I think longer term as we look to the spring, yes, I think we could see rates moving down to new lows and possibly below 3%,” he said. “It’s certainly possible.”

The bond-buying will take the form of $500 billion in Treasury bills and $200 billion of agency-backed mortgage securities, Fed Chairman Jerome Powell said on a conference call with reporters on Sunday night.

The Fed’s MBS purchases started Monday with $5.1 billion of 30-year uniform MBS, backed by Fannie Mae and Freddie Mac, along with $2.5 billion of 30-year Ginnie Mae bonds, which include loans backed by the Veterans Administration and the Federal Housing Administration, according to New York Fed data.

On Tuesday, the Fed bought $1.1 billion of bonds containing 15-year fixed-rate mortgages backed by Fannie Mae and Freddie Mac, as well as $2.5 billion of 30-year Ginnie Mae mortgages.

On Wednesday, the central bank purchased $5.1 billion of 30-year Fannie Mae and Freddie Mac mortgages, and $1.1 billion of MBS containing 15-year mortgages backed by the two government-sponsored enterprises, or GSEs.

On Thursday, the biggest day of purchases so far, the Fed bought $15.3 billion of 30-year mortgages backed by Fannie Mae and Freddie Mac. On Friday the Fed said it plans to buy $2.5 billion of 30-year Ginnie Mae bonds.

For next week, on Monday the Fed plans to buy $5.1 billion of 30-year Fannie Mae and Freddie Mac securities, as well $2.5 billion in 30-year Ginnie Mae bonds. On Tuesday, it plans to buy $5.1 billion in 30-year Fannie Mae and Freddie Mac MBS as well as $2.5 billion in Ginnie Mae securities.

On Wednesday, it’s planning to purchase $5.1 billion of 30-year Fannie Mae and Freddie Mac bonds, as well as $1.1 billion of 15-year bonds also backed by the two GSEs.

For Thursday, the Fed said it plans to buy $2.5 billion of 30-year Ginnie Mae bonds and $1.1 billion of 15-year mortgages backed by Fannie Mae and Freddie Mac.
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