Agency MBS Purchase

Definition of 'Agency MBS Purchase'


The purchase of mortgage-backed securities issued by government-sponsored enterprises such as Ginnie Mae, Fannie Mae or Freddie Mac. The term is most commonly used to refer to the U.S. Federal Reserve's $1.25 trillion program to purchase agency mortgage-backed securities, which commenced on Jan. 5, 2009 and was completed on Mar. 31, 2010.

Investopedia explains 'Agency MBS Purchase'


The goal of the Federal Reserve's $1.25 trillion agency MBS purchase program was to provide support to mortgage and housing markets, and also to foster improved conditions in financial markets. When the Federal Reserve commenced these purchases in January 2009, the U.S. and global equity markets were trading at multi-year lows amid an intense credit crunch, and widespread concern about the global economy heading for a depression.

The MBS purchase program was instrumental in providing price support to these securities and dissipating the panic that had gripped many market participants. By the time the Federal Reserve completed the purchase program in March 2010, the S&P 500 had appreciated more than 75% from its March 2009 low and global equity markets had been in full rally mode for over a year, perhaps exceeding the Fed's most optimistic expectations.



comments powered by Disqus
Hot Definitions
  1. Federal Reserve Note

    The most accurate term used to describe the paper currency (dollar bills) circulated in the United States. These Federal Reserve Notes are printed by the U.S. Treasury at the instruction of the Federal Reserve member banks, who also act as the clearinghouse for local banks that need to increase or reduce their supply of cash on hand.
  2. Benchmark Bond

    A bond that provides a standard against which the performance of other bonds can be measured. Government bonds are almost always used as benchmark bonds. Also referred to as "benchmark issue" or "bellwether issue".
  3. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
  4. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  5. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  6. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
Trading Center