Fed’s Plan for Balance Sheet

2018-01-02T18:46:34+00:00 May 25th, 2017|Categories: Uncategorized|Tags: , , , , , , , |

During the quantitative easing years of 2008 through 2014, the Fed acquired trillions of dollars of Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities (Agency MBS) and U.S. Treasuries. Its balance sheet grew from under $1 trillion to over $4 trillion. The Fed stopped adding to its holdings a few years ago, but has maintained a policy to reinvest principle payments received, thus maintaining a steady level of investments. At times over the last few years when refinance activity was high and the Fed was reinvesting the principle payments it received, the Fed was the buyer of the vast majority of all newly issued Agency MBS. Even recently, the Fed has been the buyer of approximately 25% of newly issued Agency MBS. The demand from the Fed for Agency MBS has had a positive effect on mortgage rates. For the past few months, Fed speakers have been saying that the time to begin “normalizing their holdings was near. But few details were provided.  The minutes of the Fed’s May 3nd meeting, released on May 24th, provided some details about their plan. Although many details remain unknown. The plan calls for the Fed to tell investors the maximum amount it [...]

Special Update: Brexit

2016-10-11T17:34:54+00:00 June 20th, 2016|Categories: Special Update|Tags: , , , , |

This week, a major influence on U.S. mortgage rates will be the “Brexit vote on Thursday. It is very difficult to predict the effect on the global economy if the UK were to leave the European Union or whether it would lead to similar votes in other countries. Due to the economic uncertainty which would result, a vote for the UK to exit the EU is expected to be positive for U.S. mortgage rates, while a vote to remain would be negative. As each new poll shifts the odds, investors react immediately. This increases daily volatility, as investors factor the expected outcome into asset prices. For example, the latest poll showed greater support to remain, and mortgage rates have moved higher today.

Load More Posts