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Fed Buying Helps Lift Fannie Mae Mortgage Bond to Record High

  • Coupon spread has tightened deep into negative territory
  • The central bank has purchased over $338 billion since March

The Fannie Mae 30-year 2.5% mortgage bond TBA, or forward settling mortgage-backed securities, hit a fresh record high, according to data compiled by Bloomberg.

Lower supply, as production instead shifts down the coupon stack, and Federal Reserve buying have helped boost the coupon’s price, which touched 105-15+ Monday morning in New York. In terms of Treasury option-adjusted spread, the coupon offers negative 34 basis points as of Friday’s close, down from zero at year-end and positive 15 basis points at the end of November.