The Fed’s shift to rate cuts is helping to increase demand for agency MBS. And other activity at the federal level has prompted a reduction in volatility, providing stability for investors.

While the Fed is moving away from purchases of agency MBS, portfolio managers at PIMCO believe additional purchases are warranted. In the meantime, the GSEs are increasing their investments.

Beginning in December, the Federal Reserve will adjust its balance sheet strategy and no longer reinvest proceeds from payoffs of agency MBS into more MBS.

Trade groups representing smaller lenders called on the Trump administration to prompt the GSEs to increase their holdings of MBS as a way to reduce mortgage rates.

Fed still working toward a Treasury-only balance sheet; BlackRock, Hoplon units partner to bring in new ABS issuers; ABS East set for record attendance; CREFC adjusts plans for DC symposium.

In the early years of Fannie/Freddie conservatorship, investors were seeking an explicit guarantee of GSE MBS as part of any reform effort. More recently, they have shown an acceptance for maintaining an implicit guarantee.

Non-agency MBS was the fastest-growing niche in residential securities during the second quarter as outstanding volume reached its highest level since 2017. (Includes two data tables.)

Annaly Capital Management remained the biggest REIT MBS investor at midyear, although AGNC had the largest portfolio of agency MBS. REIT holdings of non-agency MBS declined. (Includes two data tables.)

With the Fed widely expected to reduce the federal funds rate next week, demand for agency MBS is rising. Banks are also projected to add to their holdings, though their buying might be somewhat delayed.

KBRA downgrades jumbo MBS issued by JPMorgan Chase in 2015; Community Bank sells MBS holdings at a loss; Morningstar details private-rating share.