The US housing market welcomes "national team": rumors that "two housing agencies" are buying MBS securities against the trend, to alleviate the pressure of skyrocketing interest rates amidst the war.

According to an informed source, Fannie Mae and Freddie Mac have begun purchasing a large number of mortgage-backed securities (MBS) in order to enter the volatile market affected by the widening bond spread and soaring volatility. The source stated that these two government-controlled entities are trying to take advantage of the recent sell-off to buy, while also expanding their already considerable bond and loan portfolios. Earlier, President Trump instructed these two companies to acquire $200 billion in MBS securities to lower mortgage rates and increase housing affordability. The increase in buying activity may help alleviate the interest rate spikes caused by the Iran war, which has already pushed rates to a three-month high. However, this may only partially offset the broader market pressure brought by the conflict, as evidenced by the significant increase in US Treasury yields last Friday. Representatives of Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency, which regulates these two companies, have not responded to multiple requests for comments. Fannie Mae and Freddie Mac, by purchasing and packaging home mortgages into securities and providing financial guarantees to homebuyers, have become one of the largest holders of mortgage debt in the United States. They hold these debts through so-called retained investment portfolios (bonds and loans they hold rather than selling to investors). These two companies have been regulated by the federal government since 2008, with their total assets once reaching up to $1.5 trillion, but by the end of 2022, this number had fallen to just $158 billion. Since the middle of last year, their asset portfolios have started to grow again, with the latest data showing the total reaching $278 billion as of January this year. Trump's directive for Fannie Mae and Freddie Mac to increase their bond and loan purchases immediately caused turbulence in the roughly $9 trillion MBS securities market, with the yields on recently issued securities narrowing by about 0.2 percentage points compared to US Treasury bonds. However, in the following weeks, the pace of these two companies' purchases has been very slow. This may reflect that the risk premium for many mortgage-backed securities is already low, limiting their profit potential and making it difficult to have a substantial impact on mortgage rates. Subsequently, the spreads on mortgage-backed securities widened sharply, partly due to the escalating Middle East conflict causing oil price fluctuations, leading to interest rate volatility affecting the fixed income market.