After government-sponsored enterprise Freddie Mac (FRE) saw its mortgage portfolio decrease at an annualized rate of 8.1% in April, the central bank’s efforts to lift mortgage-related securities off its balance sheet continued well into May. The Federal Reserve’s weekly agency mortgage-backed securities (MBS) purchases picked up in the week ending May 27 as its balance sheet, although still heavy with efforts to relieve mortgage-related assets from banks’ balance sheets and stimulate continued lending, contracted to $2.07trn. The Fed bought a gross $33.4bn MBS from mortgage giants Freddie Mac and Fannie Mae (FNM), as well as from Ginnie Mae, up from $25.52bn last week but still down from the $35.6bn purchased in the week before. The Fed bought $11bn from Freddie, $19.5bn from Fannie and $2.9bn from Ginnie. It sold a total $7.86bn in MBS this week up more than 800% from last week’s $845m in MBS sales. The weekly purchases continued to favor MBS with 30-year maturations at 4.5% coupons,with $3.35bn to settle in June, $10.3bn to settle in July and $3.5bn to settle in August. Despite the Fed’s $17.15bn in purchases of these MBS, no sales of similar MBS was slated this week. This disparity is not a new phenomenon. In last week’s round of sales and purchases, for example, the Fed bought $15.05bn of the same MBS and sold only $95m of similar MBS. Elsewhere in the weekly purchase report, the figures seem a bit more level. In the week ending May 27, the Fed also bought $7.25bn of 30-year MBS at 5% coupons, with $6.25bn to settle in June and $500m to settle in both July and August. It purchased $3.15bn of 30-year MBS at 5.5% coupons, with $2.65bn to settle in June and the rest to settle in July. During the same time, the Fed sold $5.5bn of 30-year MBS at 5% coupons and $2.36bn of 30-year MBS at 5.5% coupons, both of which settle in July. See a detailed chart of the Fed’s weekly purchases and sales. Despite a bit of week-to-week normalcy in the low end of the purchases, months of discrepancy in purchases and sales has made an impact on the Fed’s balance sheet. The balance sheet contracted $90.67bn the same week ending May 27 to a total $2.07trn, down from $2.17trn the week before, according to a weekly summary released Thursday. The balance sheet shows the Fed added $417m in MBS to its balance sheet this week, for a total of $430.9bn in MBS added to its balance sheet since the same time last year. It also added $79.75bn in agency debt securities since last year, in an attempt to free up capital at the agencies and encourage more mortgage activity at lenders that package and sell loans to the agencies. Write to Diana Golobay. 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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