Fed Bought $10.2 Bln Of Agency Mortgage Bonds Jan 5-7
01/08 03:42 PM
NEW YORK (Dow Jones)--The Federal Reserve bought $10.213 billion of mortgage securities backed by Fannie Mae (FNM:$0.791,0$0.041,05.47%) , Freddie Mac (FRE:$0.80,00$0.05,006.67%) , and Ginnie Mae in the first three days of its new program to support the housing market.
The central bank has pledged to purchase $500 billion, or possibly more, of these bonds backed by home loans in the first half of the year, in an effort to push down mortgage rates.
Market participants had expected the Fed purchases to average $3 billion to $4 billion daily, which would keep it on target to complete the aggressive spending spree within the first half of this year.
There was little reaction Thursday afternoon in the mortgage bond market to the data. Risk premiums on these mortgage bonds were two basis points tighter to comparable Treasury yields late afternoon.
"People already knew the Fed was buying heavily," said Art Frank, a mortgage strategist at Deutsche Bank (DB:$35.2500,$-1.7100,-4.63%) .
Risk premiums on these bonds have narrowed as much 100 basis points from their highs in November before the Fed announced its purchasing program.
As a result, mortgage rates that homeowners pay also have fallen from above 6% levels in November to 5.01% as of Thursday, according to Freddie Mac (FRE:$0.80,00$0.05,006.67%) .
Additionally, the extent of Fed purchases is expected to push other investors, who had shied away from this market, to return.
Most of the central bank's purchases were of mortgage bonds guaranteed by Freddie. It bought $6.899 billion of Freddie bonds, $2.864 billion of Fannie bonds, and $450 million of Ginnie Mae securities.
Much of its buying was concentrated in the 30-year 4.5% and 5% coupons, according to Fed data.
The central bank, over the three days, bought $3.45 billion of 4.5% coupon and $3 billion of the 5% coupon.
-By Prabha Natarajan, Dow Jones Newswires; 201-938-5071; prabha.natarajan@ dowjones.com
(Anusha Shrivastava contributed to this report.)
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(END) Dow Jones Newswires
01-08-091542ET
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