During the week of August 17, 2015, the Federal Reserve Bank of New York (New York Fed) Open Market Trading Desk will begin a process to streamline the administration of the agency mortgage-backed securities (MBS) held in the System Open Market Account (SOMA) by consolidating some of these securities through a service offered by Fannie Mae and Freddie Mac called CUSIP aggregation. Through this process, aggregated CUSIPs are formed by consolidating existing agency MBS with similar characteristics into larger pass-through securities. This process is commonly used by market participants, although the scale of aggregation in this case will be large by market standards. Because all of the payments on the underlying agency MBS flow through to the aggregated CUSIPs, the aggregation process will not otherwise affect the size or characteristics of the SOMA portfolio. No inference should be drawn from CUSIP aggregation about the timing or nature of any future monetary policy actions.
The aggregation process will significantly reduce the number of individual agency MBS CUSIPs held by the Federal Reserve, thereby reducing the administrative costs and operational complexity associated with managing the MBS portfolio. The SOMA currently holds approximately 80,000 individual agency MBS CUSIPs. The aggregation process will reduce the number of CUSIPs to about 20,000. In 2011, the Desk conducted a CUSIP aggregation program that consolidated the roughly 44,000 CUSIPs in the SOMA at that time to fewer than 10,000.
The New York Fed publishes detailed data on all settled SOMA agency MBS holdings on its public website on a weekly basis. As CUSIP aggregation takes place, this weekly publication will include a listing of the individual agency MBS CUSIPs underlying each aggregated CUSIP. In addition, Fannie Mae and Freddie Mac provide information about aggregated CUSIPs, including the underlying agency MBS, on their public websites. Thus, the public will continue to have access to listings of all the MBS CUSIPs that are included in this aggregation effort. For more details on the aggregation strategy, please refer to the frequently asked questions page.
