US Mortgage Bonds Rally as Trump Demands $200 Billion of Purchases

US President Donald Trump is directing Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds, a move he cast as his latest effort to bring down housing costs ahead of the November midterm election.

Trump announced the move on Thursday in a social media post, saying “This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable.”

He added that his decision not to sell Fannie Mae and Freddie Mac during his first term allowed them to amass “$200 BILLION DOLLARS IN CASH” and that he was making his announcement “because of that.”

“It is one of my many steps in restoring Affordability, something that the Biden Administration absolutely destroyed,” the president said.

Mortgage-backed securities rallied relative to Treasuries on the news, while mortgage-linked stocks including Rocket Cos. Inc. and LoanDepot, Inc. rose.

Fannie Mae and Freddie Mac, government-sponsored enterprises that the US bailed out during the 2008 financial crisis, have already been increasing their holdings of mortgage bonds. The housing-finance giants grew their retained portfolios — the portion of bonds and loans they hold onto rather than sell to investors — by more than 25% in the five months through October, according to recent figures.

Strategists have noted that doing so is a relatively straightforward way to help bring down mortgage rates, because greater demand for MBS translates into tighter risk premiums that carry through to underlying mortgages.

“If the Trump administration allows Fannie and Freddie to grow their retained portfolios, there’s no question it will have downward pressure on mortgage rates – probably at least a quarter of a point, maybe more,” said David Dworkin, president and chief executive officer of the National Housing Conference.

The 30-year mortgage rate averaged 6.16% in the week ending Jan. 8, Freddie Mac said on Thursday, near the lowest level since Oct. 2024.

Citigroup estimated late last year that if the two GSEs were to boost their portfolios by $250 billion then risk premiums on the bonds could drop by about 0.25 percentage points, potentially translating into a similar size drop in the mortgage rates that consumers pay.

Still, some analysts weren’t convinced the move would have a major impact. Neil Dutta, Renaissance Macro Research’s head of economics, noted that mortgage spreads have already tightened.

“So, I am not sure what this action will really do. Much of the juice appears to have been squeezed,” Dutta said.

Bill Pulte, director of the Federal Housing Finance Agency, said Thursday the bond purchases “can be executed very quickly. We have the capability, we have the cash to do it, and we are going to go about executing it very smartly and in a very big way.”

Pulte said the bond-buying initiative made for a “one-two punch” with a plan Trump announced Wednesday to ban institutional investors from buying single-family homes. Trump said he planned to elaborate on the plan and other affordability proposals when he speaks at the World Economic Forum in Davos, Switzerland, later this month.

The initiatives come after the president’s advisers have repeatedly raised alarms that cost of living has become a political albatross for the GOP and could cost the party control of Congress in elections this fall.

Pulte said in a CNBC interview earlier Thursday that Trump would decide in a month or two whether to move forward with an IPO of Fannie and Freddie.

The bond-buying initiative may suggest that such plans are taking a back seat, according to a research note by Jaret Seiberg, managing director at TD Cowen.

“We view the President’s comment as negative for ending the GSE conservatorships,” Seiberg wrote. “Trump praised his decision not to IPO the companies in this first term. And he suggested he could use these companies to aid housing affordability. This does not sound like a President who is in a rush to IPO the enterprises.”