RT Journal Article SR Electronic T1 Normalizing the Federal Reserve’s Balance Sheet: The Impact on the Mortgage-Backed Securities Market JF The Journal of Structured Finance FD Institutional Investor Journals SP 16 OP 29 DO 10.3905/jsf.2018.23.4.016 VO 23 IS 4 A1 Laurie S. Goodman A1 Bing Bai YR 2018 UL https://pm-research.com/content/23/4/16.abstract AB The Federal Reserve’s purchase of large quantities of assets from the private sector between November 2008 and September 2014, known as quantitative easing, resulted in the Fed’s ownership of $1.77 trillion of agency mortgage-backed securities (MBS) and $2.45 trillion of U.S. Treasury securities as of September 2017. In October 2017, the Fed began to reduce these holdings. This brief examines the plans to reduce these holdings and the impact these actions will have on the MBS market. The authors show that both MBS and Treasuries will run off less quickly than the targeted run-off amounts, and that under similar assumptions to what the Fed has used, there will still be about $1.18 trillion of MBS on its books when the Fed balance sheet normalizes. They also argue that the Fed may want to take advantage of its remaining reinvestment period to do some minor rebalancing. Moreover, the Fed can take additional action at no cost that will help launch the single government-sponsored enterprise security.TOPICS: MBS and residential mortgage loans, legal and regulatory issues for structured finance