The Fed's balance sheet is ballooning out of control.
Nearly $7 Trillion in Securities, $2 Trillion Mortgages
As of August 26, 2020 the Fed's Balance Sheet is nearly $7 trillion total of which $3.7 trillion are notes or bonds, and nearly $2 trillion in mortgages (Fannie Mae, Freddie Mac (OTC:FMCC), or Ginnie Mae).
No End in Sight to Fed's Mortgage Buying Spree
Bloomberg reports No End in Sight to Fed's Mortgage Buying Spree.
Key Points
- The Fed has snapped up $1 trillion of mortgage bonds since March. It bought around $300 billion of the bonds in each of March and April, and since then has been buying about $100 billion a month.
- The Fed now owns almost a third of bonds backed by home loans in the U.S.
- Buying the securities has pushed mortgage rates lower, with the average 30-year rate falling to 2.91% as of last week from 3.3% in early February.
- Morgan Stanley (NYSE:MS) analysts pointed out in late March that the buying was running at eight times the pace seen in prior episodes of Fed purchasing under programs known as quantitative easing.
- Just before this latest round, principal payments from its mortgage bond holdings had whittled that down to 21%, but it has now increased back to 30%.
- If the Fed maintains its current buying pace, it will again own 34% of the mortgage universe by year’s end.
Fed's Balance Sheet Expansion Over Time
Questions of the Day
- Does the Fed have everything under control?
- Is the Fed totally out of control?
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