Inquiring Minds Want To Know…..Questions For The Federal Reserve
Posted By thestatedtruth.com on July 1, 2010
Borrowing costs have tumbled in the past two months as concern that a debt crisis in Europe may spread boosted demand for the safety of bonds including mortgage-backed securities. The lower rates have failed to lift housing demand, which has tumbled since a tax credit for first- time and certain other buyers expired at the end of April.
The average price of $5.2 trillion of bonds guaranteed by government- supported Fannie Mae and Freddie Mac or federal agency Ginnie Mae climbed to 106.3 cents on the dollar yesterday, according to Bank of America Merrill Lynch’s Mortgage Master Index. That’s up from 104.2 cents on March 31, when the Federal Reserve ended its program purchasing $1.25 trillion of the debt.
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But did the Fed really stop buying MBS?
The Fed planned to stop buying MBS at the end of this March, yet Fed MBS balances have increased by $45 billion since March 31. What will happen to the housing market when the Fed finally does begin to lower its MBS balances?
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