Estimates for Sep-Oct 2010 Fed Treasury Purchases

Due to material increases in MBS factors for the 4.5% and 5.0% coupons in the Fed's MBS portfolio (indicating not only increased refinancing but mortgage default payouts by the GSEs), along with an increase in agency debt maturing over the four week period, Treasury purchases are expected to jump nearly $7.5 billion from the $18 billion bought in the first four week purchase period. Next Monday, Sep 13 at 2:00 pm, Brian Sack tells us just how close we are.

Agency MBS Principal Payments* $21,066,000,000

Agency Principal Payments 494,657,000

Agency Maturing** 3,946,000,000

Est. Treas. POMO mid-Sep to mid-Oct $25,506,657,000

* Includes purchase of 120 day delinquent mortgages by Freddie Mac. See page 37.

** Per FOMC Minutes released Aug 31, 2010, Fed will replace maturing Agency debt with Treasury securities. This accounted for our shortfall in the Aug-Sep estimate wherein it was believed the Fed would replace maturing Agency debt with like securities. Apparently, the Fed cannot miss the opportunity to gift a commission to the PDs and float the Treasury market.