Fed to Save the Day? And if Not?

The Federal Reserve today reported on their weekly purchases of agency mortgage-backed securities (MBS).

In the week ending January 27, 2010, the Federal Reserve purchased a total of $12.50 billion agency MBS. In those five days the Federal Reserve sold $500 million (supported the roll market) for a net total of $12 billion purchases.

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 in January 2009, the Fed has spent $1.16 trillion in the agency MBS market, or 92.87 percent of the allocated $1.25 trillion, which is scheduled to run out in March 2010. This leaves $89.1 billion left to purchase MBS coupons in the TBA market.