Fed report puts agency market at $7.65 trillion in first quarter

By Angela McDaniels

Tacoma, Wash., June 9 - The total amount of securities backed by agencies and government-sponsored enterprises increased to $7.65 trillion at the end of the first quarter from $7.60 trillion at the end of the fourth quarter, according to the Z.1 flow and outstandings report released by the Federal Reserve on Thursday.

But the latest figure was down slightly from $7.66 trillion at the end of the first quarter of 2010.

Of the $7.65 trillion outstanding at quarter-end, the majority - $6.44 trillion - was issued by GSEs.

On the buyside, U.S.-chartered commercial banks held the greatest amount of agencies, $1.31 trillion, followed by what the report termed the "rest of the world" with $1.17 trillion, the Federal Reserve with $1.07 trillion, mutual funds with $800.8 billion and state and local governments with $444.1 billion.

On a year-over-year basis, the amount of securities held increased for mutual funds (17.0%) and U.S.-chartered commercial banks (up 7.3%), decreased for the Fed (down 16.6%) and the rest of the world (down 1.5%) and was essentially flat for state and local governments (up 0.7%).

Flows up by $224.5 billion

On a seasonally adjusted annualized and net basis, total liabilities in the agencies market rose by $224.5 billion during the first quarter of 2011, according to the report.

In the fourth quarter of 2010, net liabilities fell by $41.4 billion.

The $224.5 billion increase was driven by a $212.3 billion increase for agency- and GSE-backed mortgage pools. GSEs, in contrast, saw an increase of only $11.1 billion in the fourth quarter and fell by $254.3 billion in the fourth quarter of 2010.

In comparison, net liabilities increased by $734.6 billion for Treasuries, decreased by $62.7 billion for municipals and decreased by $2.1 billion for corporate and foreign bonds in the first quarter on a seasonally adjusted annual basis.

On the buyside, the household sector increased its holdings of agencies by a net $373.9 billion during the first quarter on a seasonally adjusted annual basis. Real estate investment trusts posted an increase of $189.1 billion, and credit unions increased their holdings by $50.6 billion.

Notching large declines in their agency holdings were the Fed (negative $279.8 billion), money market mutual funds (negative $129.2 billion), asset-backed securities issuers (negative $70.0 billion) and the federal government (negative $43.1 billion).

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