Banks laden with mortgage bonds stand in the middle of the Federal Reserve’s decision to launch a new round of quantitative easing.
Central bank purchases of $40 billion of agency paper a month stand to compress spreads to Treasuries and lift the value of existing holdings, but lower yields would make the instruments a less attractive place to park funds. But while large holding companies have increased their allocations to bonds issued by Fannie Mae, Freddie Mac and Ginnie Mae – by four percentage points of total securities in the year through June 30 among the group considered here – positioning varies widely across individual companies, providing insight into differing strategic orientations. (Use the dropdown in the graphic below to select individual companies and view the composition of their securities holdings. Select “Aggregate” to see securities composition for the group together. Text continues below.)