New MBS Strategy Aligns with Fed's Balance Sheet Shrinkage
US Treasury Secretary Scott Bessent recently revealed a new initiative targeting mortgage-backed securities (MBS). The plan aims to align the government's purchase pace with the Federal Reserve's ongoing balance sheet reduction.
According to Bessent, the Fed currently sees about $15 billion in bond runoff each month. This provides a clear benchmark for the government to introduce new liquidity into the market at appropriate intervals.
Enhancing Housing Affordability
President Trump issued an executive order last Thursday directing the Federal Housing Finance Agency to purchase $200 billion in MBS. The move is designed to relieve pressure on the housing market and improve accessibility for average home buyers.
FHFA Director William Pulte confirmed that the first $3 billion in purchases has already been executed, marking the beginning of this significant policy shift.
- Monthly pace mirrors Fed's runoff
- First tranche of $3 billion completed
- Focus on improving housing affordability
This initiative demonstrates proactive measures being taken to address housing market challenges. By synchronizing with the Fed's reduction schedule, the government seeks to maintain financial market stability while tackling housing supply and pricing issues.