Why does the Federal Reserve continue to transact in agency MBS dollar rolls and coupon swaps following the completion of program purchases?
The Federal Reserve uses agency MBS dollar rolls as a supplemental tool to address temporary imbalances in market supply and demand. A dollar roll is a transaction conducted at market prices that generally involves the purchase or sale of agency MBS for delivery in the current month, with the simultaneous agreement to resell or repurchase substantially similar (although not necessarily the same) securities on a specified future date. A coupon swap is a transaction conducted at market prices that involves the sale of one agency MBS with the simultaneous agreement to purchase a different agency MBS. Coupon swaps are transactions that allow the Federal Reserve to sell agency MBS that are not readily available for settlement, and purchase different agency MBS that are more readily available for settlement. Although purchases were completed at the end of March 2010, the Federal Reserve continues to use both dollar roll and coupon swap transactions to facilitate an orderly settlement of the
Related Questions
- Why was it necessary for the Federal Reserve to transact in the agency MBS market via external investment managers?
- Why is it necessary for the Federal Reserve to transact in the agency MBS market via external investment managers?
- With whom does the Federal Reserve transact agency MBS dollar rolls and coupon swaps?
