The scheduled completion of the Federal Reserve's MBS purchase program this March has created fears that rising mortgage rates will exert renewed pressure on home prices. While the program has been successful in keeping primary rates low, it has had some unanticipated effects that will impact the housing and capital markets even after outright purchases have ended.

The Fed's $1 trillion or so of net purchases last year were concentrated in 30-year conventional coupons, with FNMAs comprising roughly 57% of the total. Their conventional purchases have ranged across the coupon stack; 4s and 4.5s comprised 56% of their net buying, with the remainder concentrated in 5s and 5.5s.

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