The Fed Continues Buying

August 4, 2020
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The Fed’s balance sheet has swelled from $4.2 trillion at the beginning of March to $7.2 trillion by mid-June.

 

The Federal Reserve purchased $22.686 billion in agency mortgage-backed securities (MBS) during the week from July 9 to July 15, up from its $21.685 billion in the previous week. The New York Federal Reserve Bank announced the purchase, adding the central bank did not sell any of its MBS guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae during this period. In the previous week, the Fed sold $3.6 billion worth of MBS. The Fed’s balance sheet has swelled from $4.2 trillion at the beginning of March to $7.2 trillion by mid-June. Bloomberg columnist Christopher Maloney observed that “volatility has plunged 67% from its decade-plus high seen before quantitative easing resumed March 16, and is now well below its trailing five-year average. That benefits MBS investors as the chance of a borrower having an incentive to refinance is in part a function of interest rate volatility over the life of the loan.” Anthony B. Sanders, Professor of Real Estate Finance in the School of Business at George Mason University, echoed Maloney’s observations in his Confounded Interest blog while pointing out a silver lining for the housing market in the current environment. “Ten-year Treasury Note volatility remains low as the Fed continues to flood the market with liquidity,” Sanders wrote. “The good news is that rates on home loans are at historic lows.

Source: DS News