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Mortgage Investors Cheer as Federal Reserve Restarts Purchases

  • Fed to take down about 75% of expected 2020 net supply
  • Central bank to grow MBS holdings by at least $200 billion
Long Island Home Flippers Sell To Each Other In Red-Hot Market
Photographer: Johnny Milano/Bloomberg

Mortgage prices rose and spreads tightened Monday morning as investors responded favorably to the Federal Reserve’s weekend announcement that it will resume net purchases of agency MBS for the first time since October 2014.

As of 11 a.m. New York time, prices had surged across the entire conventional 30-year coupon stack, with the lower coupons -- the 2.5% and 3% -- easily besting their Treasury and swap hedges, buoyed in part by the fact those coupons will be the primary target of Fed purchases. The same outperformance was also seen in lower coupon Ginnie Mae II 30-year coupons.