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.
Rising interest rates will likely bolster investor interest in floating-rate mortgage securities such as agency CMOs and non-agency products. The Fed expects to begin unwinding its massive agency MBS portfolio “at a coming meeting.” (Includes three data charts.)
Mortgage REITs reported declines in their holdings of agency MBS during 2021, but diverse mortgage-related investments continued to grow. (Includes data chart.)