The Federal Reserve purchased a gross $73.9bn of mortgage-backed securities (MBS) from government-sponsored entities Fannie Mae (FNM), Freddie Mac (FRE) and Ginnie Mae in the week ending May 6. After a weekly record of $48.53bn in MBS sales, the Fed’s net purchases totaled $25.37bn for the week. The Fed bought $9.09bn off Freddie’s books, $61.56bn off Fannie and $3.25bn from Ginnie in its ongoing efforts to clear mortgage-related assets from the agencies, freeing up securities investment power and in turn encouraging continued mortgage lending by banks. The Fed bought $28.9bn in MBS with a 30-year maturity and a 5.5% coupon; $28.4bn of those purchases are scheduled to settle in May. Meanwhile, $26.53bn of the Fed’s sales were 30-year MBS with 5.5% coupons. These sales are scheduled to settle on the Fed’s balance sheet in June. See a detailed chart of the Fed’s weekly purchases and sales. The month of lag between settlement of purchases and sales continues since the Fed first began reporting settlement months with its weekly data. The dollar amounts of sales as they pertain to corresponding purchases have somewhat evened out, however, indicating at least a month-to-month balance between liabilities taken onto the Fed’s balance sheet and assets sold off. The difference is evident in the weekly balance sheet, which has contracted slightly in recent weeks. The Fed’s balance sheet shrank by $46.2m in the week ending May 6, to a total $2.04trn. The balance is still up $1.17trn from the year-ago week ending May 7, 2008, according to the Fed’s data. Write to Diana Golobay at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.

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