Starting this month, the Federal Reserve Bank of New York (New York Fed) Open Market Trading Desk (the Desk) will begin the process of CUSIP aggregation, which involves streamlining the administration of a portion of the agency mortgage-backed securities (MBS) held in the System Open Market Account (SOMA). These aggregations will include only those securities that are not eligible for commingling with Uniform MBS (UMBS); decisions about any additional aggregations will be communicated at a future date.
CUSIP aggregation is commonly used by market participants and has been previously used by the New York Fed to reduce the administrative costs and operational complexity associated with managing an agency MBS portfolio. 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 inferences should be drawn about future monetary policy actions from these aggregations.
The Desk will aggregate the Freddie Mac MBS held in the SOMA that were issued prior to June 2019 and have a 45-day payment delay. These Freddie Mac MBS are not eligible to be commingled with 55-day payment delay UMBS in an aggregated CUSIP. Fannie Mae securities issued prior to June 2019, and both Fannie Mae and Freddie Mac securities issued after June 2019 have 55-day payment delays and are eligible for commingling and will not be aggregated at this time. The SOMA currently holds approximately 3,000 individual 45-day Freddie Mac MBS CUSIPs, and the CUSIP aggregation process is expected to reduce that number to around 1,000.
The full listings of all the agency MBS CUSIPs that are included in this aggregation effort will be publicly available. The New York Fed publishes detailed data on all settled SOMA agency MBS holdings on its public website on a weekly basis. As aggregations take place, this weekly publication will include a listing of the individual agency MBS CUSIPs that have been aggregated. In addition, Freddie Mac provides information about aggregated CUSIPs, including the underlying agency MBS, on its public website.
Additional information can be found in the Desk’s Frequently Asked Questions.