The Federal Reserve’s purchases of agency mortgage-backed securities pushed the Fannie Mae 30-year current-coupon spread over a blend of 5-year and 10-year Treasury notes to its tightest level ever in 2012. The resulting effect of the Fed’s massive holdings persists: From the end of 2014 to March 2016 the average spread on the Fannie Mae 30-year current coupon was 108 basis points, below even the 121-basis point average seen during the housing speculative mania’s last years in 2005 and 2006. Federal Reserve Chair Janet Yellen is hinting there could be more purchases in the future.
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