According to information obtained from a source familiar with the matter, Fannie Mae and Freddie Mac have initiated substantial purchases of mortgage-backed securities (MBS), entering a market unsettled by widening bond spreads and heightened volatility. The source indicated that these two government-controlled entities are attempting to capitalize on the ongoing sell-off to make acquisitions, while simultaneously expanding their already considerable portfolios of bonds and loans. This action follows an instruction issued two months prior for the two firms to acquire $200 billion in MBS to lower mortgage rates and improve housing affordability. The increased buying activity may help alleviate the surge in interest rates triggered by conflict in the Middle East, which has pushed rates to a three-month high. However, this intervention might only partially offset the broader market pressures stemming from the conflict, as evidenced by a significant rise in U.S. Treasury yields last Friday. Representatives for Fannie Mae, Freddie Mac, and their regulator, the Federal Housing Finance Agency, did not respond to repeated requests for comment. Fannie Mae and Freddie Mac facilitate the U.S. housing market by purchasing and packaging home loans into securities and providing financial guarantees for homebuyers, making them among the largest holders of mortgage debt. They hold this debt through their retained investment portfolios, which consist of bonds and loans they keep rather than sell to investors. The companies have been under federal government conservatorship since 2008. Their combined assets once totaled as high as $1.5 trillion, but by the end of 2022, this figure had decreased to just $158 billion. Since the middle of last year, their asset portfolios have begun growing again, climbing to $278 billion as of the latest data from January. The directive for Fannie Mae and Freddie Mac to increase their purchases of bonds and loans almost immediately caused volatility in the approximately $9 trillion MBS market, with yield spreads on recently issued securities narrowing by about 0.2 percentage points relative to U.S. Treasuries. However, in the weeks that followed, the pace of buying by the two firms was notably slow. This may reflect the fact that risk premiums on many mortgage bonds were already low, limiting their profit potential and ability to materially influence mortgage rates. Subsequently, mortgage bond spreads widened sharply, partly due to oil price volatility caused by escalating conflict in the Middle East, which triggered interest rate fluctuations that reverberated throughout the fixed-income market.