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Tsunami of Agency Mortgage Bonds Floods the Fed

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EDITOR NOTE: The Fed planned to buy $2.9 billion of 30-year uniform mortgage bonds on Friday as part of their continuing QE practices. What they got was a staggering $15.06 billion of these bonds offered up for sale. While the entire financial industry is trying to paint a rosy picture of an economy recovering from the pandemic, this rush to sell mortgage securities to the government shows that financial insiders know what’s coming. As the U.S. government ends its stimulus and pandemic protection programs, another major financial and housing crisis is on the way. Signs like this are why so many are rushing to protect their wealth from the coming crash by buying non-CUSIP gold and silver. 

The central bank’s quantitative easing schedule called for it to buy $2.9 billion of 30-year uniform mortgage bonds Friday, and that was nothing outside of its usual pattern. However, mortgage investors flooded the Fed with $15.06 billion of bonds for sale, the largest daily amount offered during a single operation since April 1, 2020.

In terms of how that compares to the total amount purchased, investors offered 5.2 times as much as were eventually taken down by the central bank. That is well above the 2.3 times average for 30-year uniform mortgage bond operations seen during all of this round of quantitative easing, and the second-highest overall. The highest submission ratio was the 5.5 times seen on July 16, 2020.

There are a number of reasons this could have happened. Investors may have wished to lighten their positions before the summer doldrums of late August, when many desks are lightly staffed due to vacations. Also, tight sector valuations or concerns about a sooner-than-expected taper may have played a part.

While this may simply be a one-off event and no reason for concern, it is certainly something to keep an eye on in case it heralds a change in investor sentiment.

Mortgage Bonds

In related news, the Treasury’s overnight reverse repos purchases remain about $1 trillion.

Mortgage Bonds

Original post from Confounded Interest

All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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