Mortgage investors are taking the coming end of the Federal Reserve’s mortgage-backed securities purchases calmly for good reason. They don’t believe it’s gone forever.
“Once the Fed crossed the Rubicon into QE, they are never going to go back,” according to Walt Schmidt, head of MBS research at FTN Financial, whose advisory group has $17 billion in agency mortgage-backed securities and collateralized mortgage obligations under management.
The Fed’s vast MBS holdings, currently $1.709 trillion, have helped drive mortgage rates to record lows, dampen volatility and boosted home prices and related securities. It’s widely forecast that by October the central bank will no longer reinvest any proceeds back into mortgages, and that should widen spreads.
Read more in Bloomberg.