The Federal Reserve's portfolio and its effects on mortgage markets

Diana Hancock and Wayne Passmore

No 2012-22, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We provide an empirical analysis of the effects of the Federal Reserve's asset holdings on MBS yields and mortgage rates. We argue that understanding the particulars of the U.S. mortgage markets, particularly the linkages between the secondary and primary mortgage markets, is important. We find evidence that the Federal Reserve's portfolio holdings influence mortgage markets, through both a \"portfolio balancing channel\" and an \"excess reserves\" channel. These two channels can work in opposite directions and their magnitudes are difficult to estimate, but on net, larger Federal Reserve's portfolio holdings seem to have placed a significant downward influence on MBS yields and mortgage rates.

Date: 2012
New Economics Papers: this item is included in nep-cba, nep-mon and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.federalreserve.gov/pubs/feds/2012/201222/201222abs.html (text/html)
http://www.federalreserve.gov/pubs/feds/2012/201222/201222pap.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2012-22

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().