Written by Econintersect
The Fed will buy at least $115 billion MBS (mortgage backed securities) from March 20 to March 27 and will continue thereafter to buy a total of at least $200 billion. These purchases are coming at a faster rate than anything during the QE cycles following the Great Financial Crisis, when the fastest purchase rates were $100 billion per month.
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This is significant, even though it is relatively small in amount ($200 billion) vs trillions in other actions, because until recently the Fed has been systematically reducing MBS holdings at a rate of about $20 billion per month.
Here is the announcement from the Fed:
Statement Regarding Agency MBS Purchase Operations – FEDERAL RESERVE BANK of NEW YORK
OPERATING POLICY
Statement Regarding Agency MBS Purchase Operations
March 20, 2020
In accordance with the most recent FOMC directive, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York has updated the current bi-weekly schedule of agency MBS purchase operations.
Specifically, today, March 20, 2020, the Desk will conduct an additional $15 billion in purchases across 2 operations for regular TBA settlement. Additionally, the Desk will target purchases of at least $100 billion for the week spanning March 23, 2020 to March 27, 2020 and will release a schedule each day for the next day’s operations. On Monday March 23, 2020, the Desk will conduct $40 billion in purchases, across 4 operations, for settlement dates noted below.
These purchases are designed to support the smooth functioning of the agency MBS market. The Desk stands ready to conduct more purchase operations in the coming days should this be appropriate to promote smooth market functioning.
Additional operations for Friday, March 20, 2020 (all times ET).
1:45 – 2:15 PM: For Class A settlement on April 15, 2020
- UMBS 30-year 2.5 securities for around $3 billion
- UMBS 30-year 3.0 securities for around $2 billion
- UMBS 30-year 3.5 securities for around $2 billion
- UMBS 30-year 4.0 securities for around $1 billion
2:45 – 3:15 PM: For Class C settlement on April 21, 2020
- G2SF 30-year 2.5 securities for around $3 billion
- G2SF 30-year 3.0 securities for around $2 billion
- G2SF 30-year 3.5 securities for around $1 billion
- G2SF 30-year 4.0 securities for around $1 billion
Schedule of operations for Monday, March 23, 2020 (all times ET).
9:15 – 9:45 AM: For settlement on April 15, 2020 (Class A).
- UMBS 30-year 2.5 securities for around $5 billion
- UMBS 30-year 3.0 securities for around $2 billion
- UMBS 30-year 3.5 securities for around $1 billion
10:15 – 10:45 AM: For settlement on March 26, 2020 (T+3).
- UMBS 30-year 3.0 securities for around $5 billion
- UMBS 30-year 3.5 securities for around $5 billion
- UMBS 30-year 4.0 securities for around $5 billion
11:15 – 11:45 AM: For settlement on April 21, 2020 (Class C).
- G2SF 30-year 2.5 securities for around $4 billion
- G2SF 30-year 3.0 securities for around $4 billion
- G2SF 30-year 3.5 securities for around $2 billion
- G2SF 30-year 4.0 securities for around $2 billion
12:15 – 12:45 AM: For settlement on April 20, 2020 (Class B).
- UMBS 15-year 2.5 securities for around $2 billion
- UMBS 15-year 3.0 securities for around $2 billion
- UMBS 15-year 3.5 securities for around $1 billion
These purchases are intended to address highly unusual disruptions in the market for agency MBS associated with the coronavirus outbreak. These operations are part of the at least $200 billion of agency MBS the FOMC directed the Desk to purchase in support of the smooth functioning of markets for agency MBS. The Desk intends to adjust terms of future operations as needed to foster smooth agency MBS market functioning and efficient and effective policy implementation. Detailed information on the schedule of MBS purchase operations is provided on the Agency MBS Operational Schedule page.
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