Sales of moth-balled, private-label MBS by the Federal Reserve had little impact on market prices, according to the minutes of the Fed's monetary policy committee. 

The Fed decided in late March to begin selling $19.5 billion in private-label mortgage-backed securities that it purchased from AIG subsidiaries in 2008 to prop up the giant insurance company.

Initial sales were "met with strong demand, but market prices of non-agency residential MBS were reportedly little changed overall," according to the minutes of the April 27-28 Federal Open Market Committee (FOMC).

The New York Federal Reserve Bank has conducted seven weekly auctions and sold $7.4 billion of the private-label MBS that the Fed holds in a Maiden Lane II portfolio. 

The Treasury Department began selling off its $142 billion in Fannie Mae and Freddie Mac MBS portfolio in March. Treasury's announcement of the sales "had little lasting effect on MBS spreads," according to the FOMC minutes released Wednesday afternoon.  

Treasury began purchasing agency MBS shortly after Fannie and Freddie were placed in conservatorships in September 2008. Now Treasury is selling $10 billion in agency MBS per month.

The Federal Reserve began purchasing agency MBS in December 2008 and accumulated a $1.25 trillion MBS portfolio before halting the purchase program in the summer of 2010.

Runoff reduced the Fed's agency MBS portfolio to $1 trillion by the end of 2010. At the April FOMC meeting, committee members re-affirmed the Fed's policy of re-investing principal payments on the agency MBS in longer-term Treasury securities.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.