Fed on Pace to Purchase $500 to $600B of MBS in Quarter

The Federal Reserve is currently on track to purchase $600 billion in government-sponsored enterprise mortgage-backed securities by the end of this quarter, according to the minutes of its Monetary Policy Committee meeting on April 29. But the committee has directed its traders to purchase "at least $500 billion" by June 30. Credit Suisse mortgage strategist Mahesh Swaminathan does not see this as a directive for the New York Federal Reserve Bank to reduce its purchases of Fannie Mae, Freddie Mac and Ginnie Mae MBS. "It does not put a limit on their purchases. Besides they have a $1.25 trillion total commitment. So they have ample room to keep buying," he said. "If they did slow down purchases, it would encourage private investor participation," the mortgage strategist added. The Fed has committed to purchase up to $1.25 trillion in agency mortgage-backed securities by the end of this year. As of May 13, Fed purchases of agency MBS totaled $457.3 billion, according to the Mortgage Bankers Association.