Fannie Mae and Freddie Mac have curtailed purchases for their retained portfolios of mortgage-backed securities.
Inna Koren, a senior vice president at Prudential Securities, said that the agencies had reduced their commitments to purchase MBS for their portfolios to $25.8 billion in April, the lowest monthly total since July 1998.
Even though Fannie Mae's commitments rose in April, Freddie's commitments to purchase MBS for its retained portfolio dropped sharply in April to $5.5 billion from $15.4 billion in March, according to Freddie Mac figures.
Koren said the agencies have been dormant for the last week or so of May. Even so, she said spreads between MBS and agency debentures are starting to widen, and that could lend support to agency buying again.
But Koren also said the prevailing winds in MBS are negative, predicting that spreads would probably widen another three to six basis points "before we move into major overweight." - ES