Operating Policy
Statement Regarding Timely Settlement of Federal Reserve's Agency Mortgage-Backed Security Purchases
June 28, 2010

This week, the Federal Reserve Bank of New York Open Market Trading Desk (the Desk) will begin conducting a limited amount of agency mortgage-backed security (MBS) coupon swap operations in order to facilitate the timely settlement of the Federal Reserve’s agency MBS purchases. A coupon swap is a standard market transaction involving an agreement to purchase one agency MBS and a simultaneous agreement to sell a different agency MBS. The Desk plans to swap unsettled Fannie Mae 30-year 5.5 percent coupon securities (Fannie Mae 5.5) for other agency MBS that are more readily available for settlement.

The operations will begin on or around Tuesday, June 29, will be conducted as expeditiously as market conditions allow, and are not expected to exceed the unsettled amount of $9.2 billion in the Fannie Mae 5.5. In addition, the Desk may continue to arrange dollar roll transactions as needed to facilitate settlement. For more details on agency MBS purchase operations, see the program’s frequently asked questions.

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