Why QE2 + QE Lite Mean The Fed Will Purchase Almost $3 Trillion In Treasurys And Set The Stage For The Monetary Endgame

“As a reminder, QE1, when completed, resulted in the repurchase of roughly $1.7 trillion in Treasury and MBS/Agency securities. It is thus safe to assume that the Fed’s QE2 will likely amount to roughly $1.5 trillion in outright security purchases. However, as we will demonstrate, this is far from the whole story, and the actual marginal purchasing impact will be substantially greater… What is very important to note, is that as Bank of America’s Jeffrey Rosenberg highlights, a material drop in rates, which is now practically inevitable, is certain to cause a surge in mortgage prepayments of agency securities: “Our mortgage team highlights a 100 basis point decline in rates would raise the agency universe of mortgages refinanciability from currently about half to over 90%.” ”
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