The Federal Reserve today reported on their weekly purchases of agency mortgage-backed securities (MBS). In the five trading days between October 22 and October 28, the Federal Reserve purchased a total of $21.906 billion agency MBS. In those five days the Federal Reserve sold  $3.906 million agency MBS (dollar rolls) with the majority of roll transactions in FN 5.0s and FN 4.5s. After sales, the Fed's weekly net purchases totaled $18.00 billion.

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.

Since the inception of the program the Federal Reserve has spent $977.13 billion, or 78.2% of the allocated $1.25 trillion which is scheduled to run out in March 2010.

Of the net $18.00 billion purchases made in the week ending October 28:

• $300  million was used to buy 30 year 4.0 MBS coupons. 1.67 percent of total weekly purchases
• $3.75 billion was used to buy 30 year 4.5 MBS coupons.  20.83 percent of total weekly purchases
• $6.30 billion was used to buy 30 year 5.0 MBS coupons.  35.00 percent of total weekly purchases
• $6.00 billion was used to buy 30 year 5.5 MBS coupons.  33.30 percent of total weekly purchases
• $1.30 billion was used to buy  30 year 6.0 MBS coupons. 7.22 percent of total weekly purchases
• $350 million was used to buy 15 year 4.0 MBS coupons.  1.94 percent of total weekly purchases

Of the $18.00 billion net total. 63.3% of the mortgage-backs purchased were Fannie Mae coupons while 29.2% were Freddie Mac, and 7.5% Ginnie Mae.

The Fed's daily purchase average was $3.60 billion per day, a decrease from last week's daily average of $3.62 billion per day.

As a reminder, the Federal Reserve has begun the process of exiting the secondary mortgage market. A gradual slowdown in daily purchases is expected to continue as the Federal Reserve wanes the mortgage market off it's support. However, up to this point the steady withdrawal has yet to affect the performance of MBS coupons versus benchmarks. This is a function of a slowdown in new production from originators.

Here is a chart illustrating the evolution of the Federal Reserve's Agency MBS Purchase Program. The Fed purchased more 4.50 coupons and less 5.50 coupons compared to last week.