Fed announces new stabilization efforts

Yesterday, the Federal Reserve announced a new stabilization package and committed to using the full range of its authorities aimed toward supporting the economy during the coronavirus pandemic.

Included in these actions is a plan for the Federal Open Market Committee (FOMC) to purchase the Treasury Department’s securities and agency mortgage-backed securities (MBS) in the amounts needed to support smooth market functioning.

The Fed will buy Treasury securities and agency MBS “in the amounts needed to support smooth market functioning.” This effort will begin this week at $625 billion and will scale up if needed. Previously, the Fed announced that the FOMC would buy at least $500 billion Treasury securities and $200 billion agency MBS in an effort to stabilize and support the economy. Long-term Treasury yields rose last week, however, and mortgage rates remain elevated relative to those yields.

 

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