UPDATE: Fed Bought $23.4 Billion Of Agency Mtge Bonds As Of Jan. 14
January 15 2009 - 4:26PM
Dow Jones News
The U.S. Federal Reserve more than doubled its buying of
mortgage bonds guaranteed by Fannie Mae (FNM), Freddie Mac (FRE)
and Ginnie Mae in the second week of its program to support the
housing market.
The central bank bought $23.4 billion of the bonds in the week
ended Jan. 14, after purchasing $10.213 billion in the previous
week, it reported Thursday.
It has pledged to buy $500 billion, or more, of these bonds in
the first half of the year, with the goal of pushing down mortgage
rates.
The bulk of the Fed's purchases was of mortgage bonds guaranteed
by Freddie Mac. It bought $15.83 billion of its bonds, after buying
$6.899 billion last week.
The bank bought $5.63 billion of Fannie Mae bonds, following a
purchase of $2.864 billion in the previous week.
It also bought $1.95 billion of Ginnie Mae bonds. Last week,
that figure was $450 million.
The Fed's program is one of many it is juggling as it expands
its role in the financial markets.
Like last week, much of its buying was concentrated in the
30-year 4%, 4.5% and 5% coupons, according to Fed data.
"The Fed is the only significant buyer of low coupons right
now," said Walt Schmidt of FTN Financial.
The current coupon or that closest to par is the mortgage bond
with a primary mortgage rate of 4% on its 30-year loans. Typically,
lenders add additional charges and fees to this primary rate to
come up with the final mortgage rate homeowners pay.
There was little reaction to the data on Thursday, Schmidt said.
Risk premiums on agency mortgage-bond securities were wider by two
to three basis points versus Treasurys.
Average risk premiums on the outstanding mortgage bonds are
quoted at 200 basis points versus a close of 194 basis points on
Wednesday.
-By Anusha Shrivastava, Dow Jones Newswires; 201-938-2371;
anusha.shrivastava@dowjones.com
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