CURRENT FED MBS BUYING SCHEDULE AND PURCHASE LOOKUP TOOL
I'm changing up this Q&A to make it shorter, denser, and better. If it's too pithy for you, revisit the previous version of this commentary HERE and take time to internalize the bigger picture).
Bullet points that answer the most common questions I receive:
- WHAT IS THE FED BUYING?
- Fannie, Freddie, and Ginnie MBS, 2.5-4.5 coupons
- Fannie, Freddie, and Ginnie MBS, 2.5-4.5 coupons
- WHY?
- Because you're not (buying MBS), and neither is anyone else (relatively). If no one is buying, no one can lend. Fed is facilitating liquidity in credit markets. Juicing MBS prices is a byproduct, not the primary goal.
- Because you're not (buying MBS), and neither is anyone else (relatively). If no one is buying, no one can lend. Fed is facilitating liquidity in credit markets. Juicing MBS prices is a byproduct, not the primary goal.
- NOT BUYING:
- 2.0 coupons
- 2.0 coupons
- START DATE:
- March 16th, 2020
- March 16th, 2020
- WHEN:
- Every biz day since then. They publish a buying schedule ahead of time and results are posted immediately (LINKED AT THE TOP)
- Every biz day since then. They publish a buying schedule ahead of time and results are posted immediately (LINKED AT THE TOP)
- HOW MUCH:
- Currently up to $30bln per day, down from $50bln (here's why). Use this search tool, enter the date in question, add up the "Total Amt Accepted" lines, and translate every thousand dollars to a billion dollars and that's how much they bought.
- Currently up to $30bln per day, down from $50bln (here's why). Use this search tool, enter the date in question, add up the "Total Amt Accepted" lines, and translate every thousand dollars to a billion dollars and that's how much they bought.
- FOR HOW LONG:
- As long as it takes
- As long as it takes
- IS THERE A "TOO MUCH?"
- No. They are the lender of last resort. They'll buy as long as liquidity is needed. Their pockets are deeper than they'd need to be in a worst case scenario.
- No. They are the lender of last resort. They'll buy as long as liquidity is needed. Their pockets are deeper than they'd need to be in a worst case scenario.
- MORE DETAILED FAQ:
- From the horse's mouth: NY FED AGENCY MBS FAQ
- From the horse's mouth: NY FED AGENCY MBS FAQ
- IF THE FED IS BUYING WHY DO SO MANY TYPES OF MORTGAGE PROGRAMS HAVE SUCH CRAPPY RATES RIGHT NOW?
- First off, remember the Fed primarily has an effect on MBS prices, and even then, there are free market forces involved that prevent Fed buying from simply buying at whatever price sellers want.
- Rather than point you toward a lengthy article I've written on this topic, I'm just going to take a moment to lay this out as simply as I can because I know it's causing confusion. In the coming wave of forbearances and economic contraction, certain loans are at more risk than others of early prepayments (bad for MBS valuations and rates). Some of those loans are also subject to requirements that keep servicers on the hook for a larger portion of monthly payments to bondholders, regardless of forbearances. While there are workarounds in place, investors are understandably cautious until getting a better lay of the land, especially when funds are already tight due to margin calls and generally lower liquidity right now. Fed buying has done what Fed buying does by making prices higher, but higher prices alone don't dictate mortgage rates. Servicing valuations are a big piece of the puzzle adding to confusion. Consider this: in some cases, originators trying to sell loans with MBS prices of 104 and getting offers of 99.00 or less due to servicing valuations.
Any other burning questions? Let me know.
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