In their August summaries released last week, Freddie Mac and Fannie Mae reported negative growth in their retained portfolios of 6.8% and 7.3%, respectively. These leave their respective ending balances at $707 billion and $726.8 billion. This follows an 18.6% contraction in July for Freddie Mac, while Fannie Mae's portfolio grew less than 1% in that month. Year-to-date, the retained portfolio growth stands at -0.6% for Freddie Mac and -0.2% for Fannie Mae. For purposes of the GSEs' agreement with the Office of Federal Housing Enterprise Oversight regarding portfolio growth, Freddie Mac estimates its total retained portfolio stands at $702.8 billion, little changed from July, while Fannie Mae's is about $723 billion, versus $724 billion in July.

In comments from Barclays Capital following the release of Freddie Mac's monthly summary earlier in the week, analysts observed that, traditionally, the change in GSE portfolios has gone hand-in-hand with the move in the current coupon OAS to agency debt, with a one-month lag. So when the OAS widens, the GSE portfolios tend to grow and vice versa. "That relationship has broken down in recent months," analysts said. "Even as the agency OAS widened, Freddie continued to reduce its portfolio, providing proof that the portfolio cap has led to significant changes in its investment behavior."

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