Portfolio holdings of agency MBS fell mostly due to lower market value for the assets. REITs also recorded a significant drop in TBA investments as agency MBS issuance declined. (Includes data chart.)
The Mortgage Bankers Association has asked the SEC to review the margin requirements in Rule 4210, arguing that lenders use to-be-announced securities to hedge their interest rate exposure rather than for speculation purposes.
It could be years before the Fed sells any of its holdings of agency MBS, according to John Williams, president and CEO of the Federal Reserve Bank of New York.
The reputation of being a safe, liquid asset adds about 47 basis points to the “convenience premium” of agency MBS over investment grade bonds, according to the National Bureau of Economic Research.