PRESIDENT TRUMP DISCUSSES PLAN TO PURCHASE $200 BILLION IN MORTGAGE-BACKED SECURITIES TO LOWER INTEREST RATES

🔸 President Trump stated that he is directing his representatives to buy $200 billion in mortgage-backed securities to help reduce mortgage interest rates and lower monthly payments.

🔸 He believes that Fannie Mae and Freddie Mac currently hold large amounts of cash and can use these funds to support the housing market and improve affordability.

🔸 When the government purchases bonds, demand increases, causing bond prices to rise. As bond prices go up, yields decrease. Mortgage interest rates typically fluctuate in tandem with the yield on 10-year US Treasury bonds.

🔸 A simple example:
- Suppose a bond pays $50 annually
- If the bond price is $1,000, the yield is 5%
- If more people buy, pushing the price up to $1,250, the bond still pays only $50

The yield now is 50 divided by 1,250, which equals 4%. The payment remains unchanged, but the price increase causes the yield to decrease.

🔸 The market reacts cautiously following President Trump’s statement, with the yield on the 10-year US Treasury bond decreasing slightly.

PS: Fannie Mae and Freddie Mac are two government-sponsored organizations. Their main task is to buy mortgage loans from banks, package these loans into mortgage-backed securities, and sell them on the market. This provides banks with additional funds to continue lending for home purchases.