Fed’s Open Market Trading Desk to No Longer Conduct Regular Operations to Buy Agency CMBS

Posted on 03/17/2021


OPERATING POLICY
Statement Regarding Agency Commercial Mortgage-Backed Securities Operations
March 17, 2021

FRBNY press release stated, “In light of the sustained smooth functioning of markets for agency commercial mortgage-backed securities (agency CMBS), the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York will no longer conduct regular operations to purchase agency CMBS at the conclusion of the current schedule. The agency CMBS purchase operation currently scheduled for March 23, 2021 is expected to be the last regularly-scheduled purchase operation. Details of this operation are available on the Agency CMBS Operation Schedule page, last updated on March 12, 2021.

Consistent with the most recent FOMC directive, the Desk remains ready to conduct agency CMBS purchase operations as needed to sustain smooth functioning of markets for these securities.”

In the FAQ, it adds, “The Desk remains ready to conduct agency CMBS purchase operations as needed to sustain smooth functioning of markets for these securities. If purchase operations are warranted, the Desk will publish details of its next operation(s)—including upcoming operation dates, the time offers are due to the investment manager, security type and maximum purchase amount—in advance. The purchase amounts will depend on the reasonableness of prices offered. Agency CMBS principal payments will not be reinvested.”

The Open Market Trading Desk is able to buy in the open market agency CMBS secured primarily by multifamily home mortgages that are guaranteed fully as to principal and interest by Fannie Mae, Freddie Mac, and Ginnie Mae and that the Desk has determined are suitable for purchase. On March 24, 2020, the New York Fed retained BlackRock Financial Markets Advisory as a third-party vendor to operationalize these purchases and transact with approved counterparties on behalf of the SOMA. BlackRock was selected on a short-term basis to serve as an investment manager after considering their expertise in trading and analyzing agency CMBS in the secondary market, and robust operational and technological capabilities.

Keywords: Federal Reserve System.

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