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Will the Fed Begin Selling MBS in the Near Term Future?

By Implode-Explode Heavy Industries

"Remember the Fed owns mostly production mortgages....81.5% of their portfolio is 30yr 4.0 coupons,4.5 coupons, and 5.0 coupons. Thinking strictly from a capitalistic perspective, if the Fed decided to sell they would drastically erode the value of their own holdings. Besides eroding their own returns, selling "in the near term" would create an uncomfortable supply/demand dislocation in the MBS market. Something the Fed worked hard to keep in check from January 2009 to March 2010."

Full post as published by Mortgage Lender Implode-o-Meter on April 23, 2010 (boomark / email).