Bonds News

UPDATE 2-Fed to make 2nd agency debt purchase Friday

(Updates with analyst comment)

NEW YORK, Dec 11 (Reuters) - The Federal Reserve will buy debt of Fannie Mae FNM.P, Freddie Mac FRE.P and the Federal Home Loan Banks on Friday, the New York Fed said on Thursday, the second agency debt purchase in its latest effort to lower mortgage rates.

Targeting the housing market that is at the heart of the economy’s malaise, the Fed said last month it would buy up to $100 billion of debt issued by government-sponsored mortgage enterprises. The Fed kick-started the program last Friday, Dec. 5, when it bought $5 billion of agency debt.

Friday’s operation will target debt maturing between December 2012 and November 2017, and the risk premiums on those longer maturities narrowed after the Fed’s announcement. Last week, the Fed targeted the 1- to 2-year maturity range.

The Fed’s purchases of longer-dated agencies could have a large impact on that sector because dealers are holding much less of those securities than of the shorter-dated notes the Fed bought last week, said Margaret Kerins, agency analyst at RBS Greenwich Capital in Chicago.

The Fed will buy the securities outright in coupon purchases, the New York Fed said on its website, adding that it will open at 2 p.m. EST (1900 GMT) and close at 2:30 p.m. (Reporting by Kristina Cooke and Lynn Adler; Editing by James Dalgleish)