Further signs the Fed cannot extricate itself from QE (even though it's not conducting QE)

A theme running through our posts since the termination of so-called QE1 in late 2009 has been the Fed's institutionalization of its large scale asset purchases. That is, far from any suggestion that this period in history will be viewed as an aberration of FOMC policy, it is in fact preparing the infrastructure for the permanent (at least as far as its own existence goes) deployment of Bernanke's wiley money printing schemes. Significant confirmation was made by SOMA Manager, Brian Sack's speech regarding balance sheet targeting in early October. And, today, the NY Fed announced it would employ Fannie and Freddie to aggregate the nearly 44,000 individual MBS securities it holds into groups, with the effect of whittling the list down to 10,000, ostensibly to improve back office management:

Next week, the Federal Reserve Bank of New York Open Market Trading Desk will begin a process to streamline the administration of the agency mortgage-backed securities (MBS) held in the System Open Market Account (SOMA) portfolio by consolidating some of these securities through a service offered by Fannie Mae and Freddie Mac called CUSIP aggregation. Through this process, aggregated CUSIPs are formed by consolidating existing agency MBS with similar characteristics into larger pass-through securities. This process is commonly used by investors, although the scale of coupon aggregation in this case will be large by market standards. No inference should be drawn from CUSIP aggregation about the timing or nature of any future monetary policy actions.

The aggregation process will significantly reduce the number of individual agency MBS CUSIPs held by the Federal Reserve, thereby reducing the administrative costs and operational challenges associated with managing the MBS portfolio. The Federal Reserve currently holds more than 44,000 individual agency MBS CUSIPs in the System Open Market Account. The aggregation process will reduce the number of CUSIPs to less than 10,000. Because all of the payments on the underlying agency MBS flow through to the aggregated CUSIPs, the aggregation process will not otherwise affect the size or characteristics of the SOMA portfolio.

The New York Fed publishes detailed data on all settled SOMA agency MBS holdings on its public website on a weekly basis. As CUSIP aggregation takes place, this weekly publication will include a listing of the individual agency MBS CUSIPs underlying each aggregated CUSIP. In addition, Fannie Mae and Freddie Mac provide information about aggregated CUSIPs, including the underlying agency MBS, on their public websites. Thus, the public will continue to have access to listings of all the MBS CUSIPs that are included in this aggregation effort. For more details on the aggregation strategy, please refer to the frequently asked questions page.

The more detailed FAQ may be found here, and while this will generate some nominal fees for the twin GSE's, we are told not to infer anything regarding future policy. But, how can we not? As ZeroHedge has noted, Bill Gross is once again stuffing his PIMCO funds with MBS securities. And, as mortgage rates are set to surge above 6% in the coming months, given Ben's historically itchy trigger finger, it become a matter of when, and not if, he will restart MBS purchases in line with the long-forgotten third Fed mandate of "moderate long-term interest rates".