Agency MBS Purchase

The purchase of mortgage-backed securities issued by government-sponsored enterprises such as Ginnie Mae, Fannie Mae or Freddie Mac. The term is most commonly used to refer to the U.S. Federal Reserve's $1.25 trillion program to purchase agency mortgage-backed securities, which commenced on Jan. 5, 2009 and was completed on Mar. 31, 2010.

The goal of the Federal Reserve's $1.25 trillion agency MBS purchase program was to provide support to mortgage and housing markets, and also to foster improved conditions in financial markets. When the Federal Reserve commenced these purchases in January 2009, the U.S. and global equity markets were trading at multi-year lows amid an intense credit crunch, and widespread concern about the global economy heading for a depression.

The MBS purchase program was instrumental in providing price support to these securities and dissipating the panic that had gripped many market participants. By the time the Federal Reserve completed the purchase program in March 2010, the S&P 500 had appreciated more than 75% from its March 2009 low and global equity markets had been in full rally mode for over a year, perhaps exceeding the Fed's most optimistic expectations.