Insanity Continues; What's The Fed Doing And Will They Buy MBS?
Posted To: MBS Commentary
Let's clear a few things up. The Fed was already buying $60bln / month of bonds. Yesterday's announcement meant that the composition of those bonds was changing. Yesterday's announcement said nothing and implied nothing about mortgage-backed securities (MBS). Yesterday's announcement may have been taken by some to imply the Fed would soon be willing to buy more MBS. The Fed is currently doing nothing MBS-related with the first $20bln per month of proceeds on its existing MBS portfolio (the first $20 bln goes to Treasuries). Anything beyond that is being reinvested as new MBS purchases. These amounts have been relatively small after the Fed phased in the $20bln cap policy. The biggest month of proceeds last year was under $30bln (i.e. under $10bln of new MBS buying) and recent…(read more)