Fed Bought $19 Billion Of Agency Mortgage Bonds As Of Wednesday

The Federal Reserve bought $19 billion of mortgage bonds guaranteed by Fannie Mae (FNM), Freddie Mac (FRE) and Ginnie Mae during the week ended Jan. 21, the central bank reported Thursday.

This compares to $23.4 billion which the central bank purchased last week.

The purchases are part of the Fed's program to buy $500 billion, or possibly more, of these bonds in the first half of the year, in an effort to push down mortgage rates.

While in the initial weeks the Fed purchases seemed to have helped bring mortgage rates below 5%, over the past week other market factors pushed these rates over that threshold to 5.12%, according to Freddie Mac's weekly mortgage survey released Thursday.

The extent of the Fed's purchases, however, continues to stay constant and on track to buy the half-trillion dollars worth of mortgages in six months when the program is scheduled to expire.

There was little reaction Thursday afternoon in the mortgage bond market to the data as it continued to move sluggishly. Risk premiums were a couple of basis points tighter on a light trading day.

On the whole, risk premiums on these bonds are now about 80 basis points off their wides in November. But this is weaker than even a week ago, as these mortgage bonds lost about 20 basis points on selling, new supply of bonds and a rise in Treasury rates.

In the past week, most of the central bank's purchases in this market were of mortgage bonds guaranteed by Fannie. It bought $11.71 billion of Fannie bonds, $5.45 billion of Freddie bonds and $1.85 billion of Ginnie Mae securities.

Much of its buying was concentrated in the 30-year 4.5%, 5% and 5.5% coupons, according to Fed data.

-By Prabha Natarajan, Dow Jones Newswires; 201-938-5071; [e-mail]

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