Mortgage Bonds Could Be At Risk After Federal Reserve Balance
The Federal Reserve balance sheet is bringing a risk to U.S. mortgage bonds according to recent reports.
"The Fed owns more than a quarter of the $6.86 trillion in agency mortgage-backed securities, and its holdings are likely to dwindle to almost nothing at some point because it only bought the securities as an emergency measure to prop up U.S. housing in the last recession," according to National Mortgage News.
"The Fed holds 18% of the publicly traded Treasuries market, and it’s likely to ultimately keep more of those holdings as part of its monetary policy arsenal."
What's more alarming is that it has some serious repercussions for mortgage giants like Fannie Mae, Freddie Mac and Ginnie Mae.
"The Fed’s effort to trim its balance sheet will mark the beginning of the end to its historic effort to gobble up mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae, concluding a program that created money for these companies to funnel into U.S. home lending," according to the report.
Despite the bit of dismal news, the report claims that the pace at which the reserve will taper should be slow. To learn more about the dangers mortgage bonds face, click on the image above.