Fed's balance sheet grows on mortgage bonds

NEW YORK Thu Jul 15, 2010 4:47pm EDT

NEW YORK (Reuters) - The U.S. Federal Reserve's balance sheet rose in the latest week on an increase of its holdings of mortgage-backed securities, Fed data released on Thursday showed.

The balance sheet -- a broad gauge of Fed lending to the financial system -- rose to $2.324 trillion in the week ended July 14 from $2.314 trillion the previous week.

They reached a record $2.333 trillion on May 19 on rising ownership of mortgage-backed securities guaranteed by Fannie Mae (FNMA.OB), Freddie Mac (FMCC.OB) and the Government National Mortgage Association (Ginnie Mae).

The central bank's holding of housing agency MBS grew to 1.129 trillion on Wednesday, up from $1.118 trillion a week earlier.

The Fed had committed to buy up $1.25 trillion in MBS and $175 billion in bonds issued by Fannie Mae, Freddie Mac and the Federal Home Loan Bank System.

It held $162.11 billion in agency securities on Wednesday, fewer than the $164.76 billion a week earlier.

These purchases were part of the Fed's quantitative easing program intended to help the ailing housing market and hold down home borrowing costs in an effort to end the worst U.S. recession in 70 years.

The Fed ended its purchases of these securities at the end of March but has continued to take delivery on them.

The central bank also began switching into lower-coupon MBS in a bid to achieve timely settlement on its purchases.

As for emergency lending, the Fed said overnight direct loans to banks via its discount window averaged $86 million in the week ended July 14, compared with a daily pace of $41 million the previous week.

(Reporting by Richard Leong; Editing by Andrew Hay)

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