U.S. Treasury Aims to Balance MBS Purchases with Fed Reductions

U.S. Treasury Secretary Scott Bessent announced a new mortgage-backed securities purchase program aimed at offsetting the Federal Reserve’s balance sheet reduction by roughly $15 billion monthly.

This initiative seeks to stabilize mortgage rates and improve housing affordability by counteracting the Federal Reserve’s quantitative tightening actions.

Treasury Launches $200 Billion MBS Support Plan

U.S. Treasury Secretary Scott Bessent has outlined a strategy to align MBS purchases with the Fed’s reduction of MBS holdings. The administration will purchase $200 billion in MBS, utilizing Fannie Mae and Freddie Mac under FHFA’s supervision. This approach aims to stabilize housing affordability in the market.

The new program intends to match the Fed’s monthly sale of $15 billion in bonds, reducing the impact of Fed’s quantitative tightening. By maintaining the demand for these securities, the Treasury seeks to lower mortgage rates and improve housing affordability.

The goal is to “roughly match” the Fed’s MBS runoff, stating that the Fed is shrinking by about $15 billion of bonds a month and the administration wants to counteract that. — Scott Bessent, U.S. Secretary of the Treasury

Historical Context, Price Data, and Expert Analysis

Did you know? In 2008, the U.S. Treasury’s MBS purchase program yielded a $25 billion profit for taxpayers, providing historical context on large-scale MBS interventions in financial crises.

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According to Coincu research, this MBS matching strategy may influence global financial conditions, potentially impacting liquidity and risk sentiment in broader markets. While the primary focus is on housing, such cues often have a spillover effect on riskier assets like cryptocurrencies.