Friday, August 17, 2007

Red Means Stop - Or, in this case, Cut the Engines!

by Ken Houghton

It is now common knowledge that the Federal Reserve accepts three types of security for its Open Market Repurchase (and Reverse Repurchase) agreements: Treasuries, Agencies, and Mortgage-Backed Securities.

Generally, the security of choice is a Treasury. This week, though, Treasuries have been a very small portion. (Last Friday, all of the securities accepted for Repo were MBS.)

Above is the blend for the past three weeks of Treasuries, Agencies, and MBSes tendered by the market and accepted by the Fed. The red area at the top of each line (if it exists) is the MBS segment.

Rather speaks for itself, don't you think?

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