After Treasury said yesterday it would sell its $142 billion MBS portfolio at a $10b per month pace over the next year, below are key stats on the MBS market overall and also the Treasury program.
-Treasury expects to make about $15 billion in profits.
–Sterne Agee noted that $10 billion is slightly more than one-third of the recent 3-month average net issuance of the total MBS market. Prior to December, net issuance had not totaled over $3.3 billion/month in any single month for 10 consecutive months.
-Treasury selling does not impact the Fed’s MBS position. They bought $1.25 trillion, which is now down to about $950 billion, and the Fed has given no signals yet that they’ll begin selling.
-Treasury’s Fannie and Freddie portfolio started at $300 billion but has since been paid down by borrowers. The bulk of its holdings (purchased between 10/08-12/09) are in Freddie & Fannie 5 & 5.5% securities, which contain 5.25-6.125% 30-yr mortgages, but the MBS pass-through rates range from 4%-6.5%, and include 15-yr MBS’s.
-Total monthly MBS pay-downs have slowed over the last 6 months (due to higher rates and fees), and, relatedly, daily origination has slowed to about $1.25 billion.