Effective March 23, 2020, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to increase the System Open Market Account (SOMA) holdings of agency mortgage-backed securities in the amounts needed to support smooth market functioning. The FOMC directed the Desk to include purchases of agency commercial mortgage-backed securities (agency CMBS) in such purchases.
The Desk will conduct its first purchase of agency CMBS on Friday March 27, 2020 with a deadline to submit offers to its investment manager at 11:00 am ET.
In this operation, the Desk will purchase up to $1 billion of fixed rate Fannie Mae Delegated Underwriting and Servicing (FNMA DUS) pools, with a 10 year loan term, a yield maintenance protection term of 9.5 years (FNMA DUS 10/9.5), and a weighted average life greater than or equal to 7 years. The Desk, through its investment manager, will solicit offers from primary dealers and will purchase up to $1 billion in total, subject to reasonable market prices. The minimum lot size per CUSIP for this operation is $5 million in current face value.
Next week, the Desk anticipates three operations on Tuesday March 31, 2020, Thursday April 2, 2020, and Friday April 3, 2020 for a tentative total purchase amount of approximately $3 billion. Purchases will be made across fixed-rate FNMA DUS pools, fixed-rate Freddie Mac K-series Deals, and Ginnie Mae Project Loan pools. The details for each operation will be disclosed one day prior to the operation. The term sheet for agency CMBS purchases can be found here.
The Desk will continue to adjust the schedule, size, and composition of purchases as appropriate to support smooth market functioning of agency CMBS markets.