Like I was saying … (emphasis in original)

“Fed Buying Agency MBS – Still No ‘Explicit’ Guaranty”, by “Mr Mortgage”, Implode-O-Meter, November 26, 2008.

Agency MBS are not ‘explicitly guaranteed’, rather under conservatorship they are ‘effectively guaranteed’, which has scared to death many large investors. MBS spreads over US Treasuries clearly show this. They likely did not want to make that announcement yesterday taking us to the quantitative easing stage, but they had to. That’s because they could not ‘explicitly’ guarantee the GSE’s $5 trillion+ in mortgage guarantees.

In my opinion, yesterday’s announcement that over the next six quarters the Fed would buy MBS was an attempt to talk the market better and is proof that they are not planning to explicitly guaranty the debt. If I were a Foreign Central Bank or Bill Gross, I would want an explicit guaranty vs .gov buying a paltry $100 billion in GSE MBS per quarter. Remember, this $500 billion represents only approximately 10% of the total outstanding GSE mortgage guarantees.

I hope I am wrong here, but I see this move as more of a cushion that allows large Agency MBS holders to sell rather than a move to keep mortgage rates down over a long period of time. I bet we see a 6 handle on mortgage rates by year end. -Best Mr Mortgage