The Federal Reserve has snapped up $1 trillion of mortgage bonds since March, a record pace of purchasing. The Fed bought around $300 billion of the bonds in each of March and April, and since then has been buying about $100 billion a month. It now owns almost a third of bonds backed by home loans in the U.S. Buying the securities has pushed mortgage rates lower, with the average 30-year rate falling to 2.91% as of last week from 3.3% in early February.
Also, according to Bloomberg News, the Fed now owns a total of 22,913 different securities (mostly bonds) and it is the world's biggest investor. Talk about crowding out the private sector and picking winners and losers in the private sector!
The Fed also paid over 100% (above par value) for many of the corporate bonds that they have purchased. And bond fund managers like Lacy Hunt are patting themselves on the back for their profitable bond trades front running the Fed, ECB, etc and claiming they were right about deflation? LOL
Jason Burack is an investor, entrepreneur, financial historian, Austrian School economist, and contrarian. Jason co-founded the startup financial education company Wall St for Main St, LLC, to try to help the people of Main Street by teaching them the knowledge, skills, research methods, and investing expertise of Wall Street. You can also find Jason's work at his blog website at www.jasonburack.com.