(Bloomberg) \u2014 Fannie Mae and Freddie Mac have begun placing sizable orders to purchase mortgage-backed securities, stepping into a market roiled by widening bond spreads and a surge in volatility, according to a person with direct knowledge of the matter.<\/p>\n
The government-controlled entities are moving to capitalize on a sharp selloff while expanding their already significant portfolios of bonds and loans, said the person, who asked not to be identified discussing confidential information. Their efforts follow a directive two months ago from President Donald Trump instructing the companies to acquire $200 billion of MBS as part of a push to drive down mortgage rates and bolster housing affordability.<\/p>\n
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The increased buying could help cushion a spike triggered by the Iran war that\u2019s sent those rates to a three-month high. Still, it may only partially offset the broader market pressures stemming from the conflict, punctuated by a marked jump in Treasury yields on Friday.<\/p>\n
Representatives for Fannie, Freddie and the Federal Housing Finance Agency, which oversees both companies, didn\u2019t respond to multiple requests for comment.<\/p>\n Fannie and Freddie, which purchase and package home loans into securities and financially guarantee them to buyers, rank among the largest holders of US mortgage debt via their so-called retained portfolios \u2014 the bonds and loans they hold onto rather than sell to investors.<\/p>\n The pair, under federal conservatorship since 2008, once held a combined $1.5 trillion worth, but by late 2022 that figure had dropped to just $158 billion. Since the middle of last year the portfolios have been on the rise again, climbing to $278 billion as of January, according to the most recent data available.<\/p>\n Trump\u2019s directive for Fannie and Freddie to ramp up bond and loan purchases sparked an almost immediate move in the roughly $9 trillion MBS market, with relative yields to Treasuries on recently issued securities narrowing about 0.2 percentage point.<\/p>\n In the weeks that followed, however, the pair bought at only a modest pace. That likely reflected already compressed risk premiums on many mortgage bonds, which left limited profit potential and reduced scope to meaningfully influence mortgage rates.<\/p>\n<\/p><\/div>\n<\/div>\n<\/div>\n<\/figure>\n